Contract Performance

In big EPC oil and gas projects, LD or penalty will not proactively protect the client's needs/interest. However, it act as a deterrent to some extent and EPC contractor always states liability will be limited and it is finally upto the client to ensure their interests are protected and organization realizes the "business value". This requires organization capability in terms of identifying the risks, data quality, capability of EPC contractor versus price charged by EPC contractor.

If the award of project is through the lowest bidder method, the bonus clause will practically be useless. In general, bonus clause might be effective when the scope of the work is unclear at the beginning of the project. But LD requirements of the contract documents will force the contractor at least to try to fulfill the project on time with required quality in lowest bidder method.

Frankly speaking I am really doubtful if there might be a win-win contract or negotiation.

Sungjoon,I tend to differ from your perception.In fact bonus clause will act as an incentive to endevour to complete the project within the agreed timelines.However,in case of project scope uncertainties; nothing can rescue a project from eventual delays resulting in EOT and prolongation costs. Inclusion of bonus clause will provide a reason and scope to realise a win-win situation.

Ideally I agree with you. But I really doubt if bonus clauses can build a win-win situation.