penalty in implementing project

Rachid Berkani general manager| Amimer Energie Alger, 16035, Algeria

Because of PV panels industry is characterized by long lead times, the supplier can’t provide quantities over 1 MW in time.
An investor in default of implementation of the project thereof shall be liable to pay a penalty equivalent until 7 % percent of total cost of project.
Can you give me your opinion how to process this ?
As risk? As contingency reserve
Thank you

Posted: Dec 1, 2016 10:33 AM

Sort By:

Rami Kaibni

Community Champion

Senior Projects Manager | Field & Marten Associates New Westminster, British Columbia, Canada

Rachid,

I am not too sure I fully understood your question but I got the big picture: An investor invested in material and has a milestone and then he discovered that not all the material can be delivered on time and there will be 7% penalty to the client ?

In this case:

1- Negotiate with the client and try to constructively discuss the situation.
2- If the client insists on the penalty, then definitely this goes out of your contingency reserve as it goes without saying that part of the risks in any project is material delay and there should always be contingency reserve for such incidents.

Hope this makes sense.

Posted: Dec 1, 2016 12:59 PM

Mudassar Khan Program (Project )Manager| Woodward Canada Inc Peterborough, ON, Canada

I agree with Rami who has put it up nicely

...

1 reply by Rami Kaibni

Jan 18, 2017 11:38 AM

Rami Kaibni

...

Thank You Mudassar.

Posted: Jan 18, 2017 3:46 AM

Rami Kaibni

Community Champion

Senior Projects Manager | Field & Marten Associates New Westminster, British Columbia, Canada

Jan 18, 2017 3:46 AM

Replying to Mudassar Khan

...

I agree with Rami who has put it up nicely

Thank You Mudassar.

Posted: Jan 18, 2017 11:38 AM

Cris Casey Managing Director| Exertus, Inc.

Rachid -

I mostly agree with Rami as well, but also offer a different approach.

It's not clear (at least to me) whether the entity responsible for providing the panels is the one being penalized; late delivery being the trigger event. If this is not the case, then the general contractor needs to include protective language to account for external factors outside their control.

Contingency amounts or risk set-asides typically would not be necessary to cover the penalty if there is counterbalancing language (similar to Act of God clauses). The same would be true for penalties the panel manufacturer should pay if they don't deliver on-time.

Best,

- Cris

Posted: Jan 25, 2017 3:14 PM

Vincent Guerard Coach - Trainer - Speaker - Advisor| Freelance Mont-Royal, Quebec, Canada

I agree with both Rami and Chris.

Form my souvenir of your market there was a real long delay between Proposal and contract awarded. That might play in your favour since market condition may have change a lot. Delivery is still the one from the RFP?
You sould see what can be use for negotiation.

Posted: Jan 25, 2017 8:29 PM

Please login or join to reply

penalty in implementing project

Sponsors

Vendor Events

Guessing is not a strategy: How to build decision velocity with AI and real-time data

Newsletters