IMCA general contracting principles

 

Version history

June 2024 Rev. 4.1 – Page 2, template and bookmarking updated; no change to content

February 2017 Rev. 4 – To add a new clause defining gross negligence and wilful misconduct and the updated principle on anti-corruption

December 2015 Rev. 3 – To include the updated IMCA competition law compliance policy

November 2014 Rev. 2 – To include 17th principle on anti-corruption

May 2011 Rev. 1 – To include 16th principle on extraordinary risk

February 2005 Initial publication

 

Summary

IMCA has published this discussion document to serve the long-term interests of all industry parties by encouraging an equitable contractual balance based on the respective risks and rewards. This in turn should improve relations, increase efficiency and reduce overall costs.

Risk allocation goals with the very apt acronym ‘FAIR’ lie at the heart.

The International Marine Contractors Association (IMCA) is the international trade association representing offshore, marine and underwater engineering companies. It has several roles but a key one is communication and promoting dialogue amongst the various companies, both clients and contractors, for the benefit of the whole industry.

In 2002, one oil company commissioned a study of the business environment in offshore contracting. The study included interviews with 15 major contractors and 12 oil companies and summary results were shared with the contributors. The feedback identified some bad experiences and an inequitable balance of risk and reward for contractors. The report identified this situation as being unsustainable. The root of the problem was almost always in the conditions of contract.

This was not an isolated event, but one which reflected views expressed by several contractors, clients and industry observers in recent years.

A variety of initiatives had been undertaken to address these concerns.

In February 2005, IMCA published a discussion document to help to: promote dialogue and encourage equitable solutions for both contracting parties; improve clarity and efficiency; and, to avoid duplication and save money.

Contracting conditions around the world are complex and numerous. Often the risks and rewards have become imbalanced – a position which is not sustainable for the industry generally.

Service contracting is a high risk activity and risk exposure can be very large and bear no relationship to Contract value. The world of risk management has changed following a number of major incidents. Insurance companies and financial institutions have become more risk aware and as a result insurance has become more restrictive and expensive and clients are attempting to transfer increasing levels of risk to contractors.

FAIR, IMCA’s risk allocation goals are as follows:

• Fair (not equal) and realistic distribution of risk in proportion to relative rewards
• Allocation of risk – to the party best placed to assume
• Insure – sufficient scope of cover
• Reasonable – avoid ‘duplicate’ assumptions of risk and minimise potential for dispute.

IMCA believes these ‘principles’ will serve the long-term interests of all participants in the oil and gas industry by encouraging an equitable contractual balance based on the parties’ respective risks and rewards. This, in turn will improve relations, increase efficiency and reduce overall costs.

The principles are not intended to represent a complete analysis of all risks which are covered by contracts in the oil and gas industry. In general, they reflect well established industry custom and practice of addressing certain risks such as the knock for knock indemnity regime.

In addition, the principles are not contractual clauses. They do not in any way form a standard contract nor is their adoption in any way mandatory. They are published as a discussion document and an aide for clients and contractors alongside their in-house standard contracts and industry published standard contracts. Each IMCA member is free to negotiate its own terms, qualify such contracts and to make use of the principles should it wish to do so in order to achieve a contract satisfactory to both parties.

IMCA is widely recognised for developing and publishing technical guidance which establishes industry good practice for many issues relating, for example, to safety and the environment. This good practice may become a contractual requirement if a client adopts it in a contract. Some clients look to IMCA membership, or compliance with IMCA guidelines as a prequalification for tendering (see IMCA LCIC001 – Competition Law Compliance Policy).

The document published in 2005 contained fifteen principles each including a comment more easily understood by the layman and showing clearly how each principle measures up to IMCA’s FAIR risk allocation goals. In 2011 a 16^th principle on extraordinary risk was added, which deals largely with security for work executed in unstable areas.

A 17^th principle on anti-corruption has been added to the November 2014 revision. The current revision includes an updated version of the anti-corruption principle (under clause 18 of the present document), in light of the new ISO Standard 37001.

In addition, the February 2017 revision introduces a new clause defining gross negligence and wilful misconduct.

At the same time, IMCA has published a parallel document, IMCA LCIC007 – IMCA Decommissioning Contracting Principles for that particular part of the industry where different considerations may apply.

In July 2006, IMCA published a related document, IMCA LCIC011 – Identifying and assessing risk in construction contracts – An IMCA discussion document to which the reader is also referred.

The principles covered in this document are:

• company group and contractor group property and personnel
• project works (including both company and contractor supplied items)
• pollution
• third parties
• consequential losses
• gross negligence and wilful misconduct
• warranty obligations
• limitations of liabilities
• minimum insurance requirements
• force majeure and suspension
• delay
• variation orders
• free access to work site
• intellectual property rights
• termination by company for convenience
• company’s obligation to pay contractor
• extraordinary risk
• anti-corruption.