1 K&L Gates Allocating Risk in Todays Marketplace December
13, 2007 Session E14
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2 Anchorage Boston New York Dallas Harrisburg Miami Orange
County Palo Alto San Francisco Spokane/ Coeur dAlene Taipei Beijing
Hong Kong Seattle Portland Los Angeles Pittsburgh Washington, D.C.
Newark London Berlin
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4 MODERATOR Brian R. Davidson K&L Gates Partner, with
K&L Gates since 1994. Represents domestic and foreign
corporations in international (ICC, UNCITRAL and AD HOC)
arbitration proceedings, and federal and state court proceedings.
Involved in several multi-million dollar industrial projects,
including steel, offshore oil and gas, and power facilities.
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5 PANELIST Eileen G. Akerson KBR, Inc. Joined KBRs Law
Department in 1999; previously a lawyer with Spriggs &
Hollingsworth in Washington D.C. Current VP, Legal and Chief
Counsel of KBRs Energy & Chemicals Division. Responsible for
managing the legal functions for KBRs Energy & Chemicals
Division.
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6 PANELIST Bart Turner KBR, Inc. Director of KBRs Legal
Department. Manages KBRs lawyers located in the Americas offices
and provides counsel to KBR on a variety of legal issues related to
KBRs activities around the globe. Involved in the development,
acquisition and execution of several multi-billion dollar
international projects for the development of oil and gas
facilities. Counseled KBR on a variety of multi-million dollar
claims.
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7 PANELIST R. Suzen Shaw Microsoft Corporation Senior Risk
Manager for Microsofts Worldwide Operations. This position places
her on the core team for every construction project undertaken
globally by Microsoft. 25 years experience in the risk management
and commercial insurance industry, including risk consulting,
brokerage, safety and loss control, underwriting, claims adjusting
and operational risk management.
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8 OVERVIEW This session focuses on two primary questions: 1.How
have current market forces impacted the construction industry?
2.Given the current market conditions, how can owners and
contractors minimize and allocate risk on any given project?
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9 THE CONSTRUCTION MARKET Has demand for large scale (non-
residential) construction projects increased over the past decade?
Does demand for construction services vary depending upon the
industry being analyzed? Data Centers Oil & Gas Transportation
Manufacturing Power Plants Other
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10 THE CONSTRUCTION MARKET Does demand for construction
services vary depending on whether the project is domestic or
international? What other variables impact the construction
marketplace? Demand for Materials Demand for Labor Contractors
Acquisitions and Consolidation
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11 ALLOCATION OF RISK Step 1: Owners and contractors identify
risk What procedures do owners and contractors use to identify
risk? Outline the role of: o sales department o management o
in-house lawyers o outside lawyers o risk managers o others
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12 ALLOCATION OF RISK Step 2: Once risks are identified, how do
contractors and owners minimize and allocate risk given current
marketplace conditions? Bidding / Contracting Owners - maximize the
number of bidders. Contractors - decide whether or not to bid.
Lenders Requirements.
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13 ALLOCATION OF RISK Securities for Payment Letters of Credit
Guarantees Credit Analysis / Payment Risks Up-front Payments
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14 ALLOCATION OF RISK Contract Structures Lump Sum Contract
Cost Plus Incentives Open-book Estimates Reimbursable EPC
Conversion from lump sum to reimbursable pricing structures Price
escalations clauses Mixed hybrid lump sum / reimbursable
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15 ALLOCATION OF RISK Contract Provisions Limitation of
Liability Clauses Termination for Convenience and Default Clauses
Liquidated Damages Waiver of Consequential Damages Indemnity
Clauses Different Site Condition Clause Change Orders
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16 ALLOCATION OF RISK Insurance/Bonding How can owners and
contractors use third-parties to protect themselves against
potential future risks? Bonds o Bid Bonds o Payment Bonds o
Performance Bonds
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17 ALLOCATION OF RISK Insurance Products o CGL o Builders Risk
o Property o Professional Liability o Default (Subguard) o Efficacy
o Force Majeure o Professional Protective Letters of Credit in Lieu
of Bonds / Retainage
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18 ALLOCATION OF RISK Owner / Contractor Relationships
Partnering Concepts Public Private Partnerships (P3s) Alliancing
Agreements (Australia)
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19 LESSONS LEARNED Market trend favors contractors for large
non-residential construction projects. Contractors should take
advantage of market forces and carefully review all options to
allocate risk to owner or third-parties.
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20 K&L Gates Allocating Risk in Todays Marketplace December
13, 2007 Session E14
