In the field of general contracting of China's leading investment projects, the "Employer's Requirements" is not only an integral part of the bidding documents, but also an important part of the EPC contract documents, a guide for the employer to carry out preparatory work before the bidding, a concrete embodiment of the project objectives of the employer, and a foothold of the rights and obligations of the employer and the contractor.
In the "Standard Design and Construction General Contracting Bidding Documents (2012 Edition)" jointly issued by nine ministries and commissions including the state, the "Employer's Requirements" was used for the first time, and the "Employer's Requirements" was taken as an integral part of the bidding documents and contract documents. In Article 9 of the Administrative Measures for General Contracting of Housing Construction and Municipal Infrastructure Projects (hereinafter referred to as the "Administrative Measures for General Contracting of Projects"), which came into effect on March 1, 2020, the requirements for the preparation of bidding documents for construction units are clarified. In the Model Text of the General Contracting Contract for Construction Projects (GF-2020-0216) (hereinafter referred to as the 2020 version of the Model Contract Text), the Requirements of the Employer and the special contract conditions are classified in the same sequence and take precedence over the general conditions, the Contractor's Proposal and the ** list, which replaces the "standards, specifications and relevant technical documents", "design documents, materials and drawings" of the 2011 General Contracting Contract in terms of contract documents. As an integral part of the EPC contract, the "Employer's Requirements" is the result of the agreement between the bidding parties through the offer and commitment, the most important document for the contractor's obligations in the entire EPC contract, and the key to the employer's realization of the purpose of the contract. When the two parties enter into a contract, the main terms of the contract, such as the subject matter, quality, schedule, construction period and cost, shall not deviate from the "Employer's Requirements".
OneDefinition and content of the Employer's Requirements
In the 2020 version of the Model Contract, "Employer's Requirements" is defined as "the document called "Employer's Requirements" that forms an integral part of the contract documents, which sets out the purpose, scope, design and other technical standards and requirements of the project, as well as the amendments or supplements agreed by the parties to the contract. Article 9 of Chapter II of the Measures for the Administration of General Contracting of Engineering puts forward clear requirements for the construction unit, and the construction unit shall prepare the bidding documents for the general contracting project according to the characteristics and needs of the bidding project. The content of the "Employer's Requirements" is clarified: "The Employer's requirements set out the objectives, scope, design and other technical standards of the project, including clear requirements for the content, scope, scale, standards, functions, quality, safety, energy conservation, ecological and environmental protection, construction period, acceptance, etc. of the project".
In Annex 1 of the 2020 version of the "Model Contract Text", the "Requirements of the Employer" for the preparation of the special contract conditions gives a template for compilation, which involves 11 items such as functional requirements, project scope, and technical requirements, and states that the "Employer's Requirements" should be as clear and accurate as possible, and for the work that can be quantitatively evaluated, the "Employer's Requirements" should not only clearly stipulate its production capacity, function, use, quality, environment, and safety, but also stipulate the scope and calculation method of deviation, as well as the specific requirements for inspection, testing, and trial operation. For the relevant equipment and services that the contractor is responsible for providing, the personnel of the employer shall be trained and some consumables shall be provided, which shall be clearly stipulated in the "Requirements of the Employer".
Based on the above, it can be seen that the "Employer's Requirements" should be a document that sets out the employer's requirements for the scope, scale, function, and standards of the project construction, rather than specific clauses scattered in the bidding documents and contract documents.
IIThe significance of the "Employer's Requirements" in EPC
From the perspective of the expression of the project implementation content, the expression of the project implementation content is completely different under the construction general contracting mode and the project general contracting mode.
It is precisely because the design depth of the scheme design drawings and preliminary design drawings is not enough and the technical parameters are not clear in this mode, and the scope of the project needs to be expressed in more depth by text description or other ways. In engineering practice, it is often due to the unclear scope of the project that leads to disputes at the cost level. Under the general construction contracting mode, there are clear construction drawings between the two parties when signing the contract, and the total price of the project can be calculated according to the drawings. On the contrary, under the EPC model, the two parties usually only have schematic design drawings or preliminary design drawings when signing the contract, and the scope and standard of engineering quantities are completely difficult to clarify at the stage of contract issuance. Therefore, the statement of the Employer's Requirements on the clarity, completeness, accuracy and feasibility of the project content is particularly important. Under the EPC model, the "Employer's Requirements" is an important shift from construction according to drawings to construction according to contracts. In the traditional construction general contracting mode, the main basis for the contractor to implement the project is the construction drawings, in the implementation of the general contracting project, the construction drawings are completed by the contractor, the contractor's participation in the construction of the project time entry point is advanced, and the main basis for the completion of the construction drawings is the specification and the "employer's requirements".
The employer will express the construction objectives, standards, functional requirements, quality, safety, construction period and other contents of the project through the "Employer's Requirements", which is an important basis for the final acceptance of the project, so as to ensure the accuracy and completeness of the projectThe Employer's Requirements are an important basic information for the contractor to participate in the construction of the project, and an important basis for the bidder to effectively identify risks in the bidding stage and reasonably determine the cost, schedule, quality and safety objectives.
When calculating the cost of change, the difference in quantity or price is calculated by comparing the new demand with the change in the corresponding standard in the "Employer's Requirements", so as to confirm the corresponding change cost. This is the biggest difference from the change in the processing of construction general contracting.
IIIThe significance and suggestions of the "Employer's Requirements" on the contract price
As one of the core concepts of EPC, the Employer's Requirements play a crucial role in influencing the contract price. From the function of the Employer's Requirements and the essence of the contract price, it can be seen that for the employer, the Employer's Requirements can clearly express the purpose of the contractFor the contractor, the Employer's Requirements reflect the boundaries of the performance obligation to a certain extent. As an integral part of the contract, the "Employer's Requirements" document is a collection of core contents that reflect the purpose of the EPC contract. The essence of the contract price is the consideration for the employer to achieve the purpose of the contract and the contractor to perform its obligations under the contract.
Tendering and bidding stage
In the 2020 edition of the Model Contract Text, "112. The "Employer's Requirements" and "Errors in the Basic Materials" clause stipulates that "the Contractor shall carefully read and review the Employer's Requirements and the basic materials provided by the Employer as soon as possible, and shall promptly notify the Employer in writing to correct any errors found." If the employer makes corresponding amendments, it shall be handled in accordance with the provisions of Article 13 [Changes and Adjustments]. If an error in the Employer's Requirements or the basic materials provided by the Employer causes the Contractor to increase costs and/or delay the construction period, the Employer shall bear the resulting increased costs and/or delay in the construction period and pay reasonable profits to the Contractor. Therefore, the Employer's Requirements are particularly important for both the employer and the contractor in terms of contract price risk.
For the employer, the Employer's Requirements do not appear independently at the contract awarding stage, and generally reflect the purpose and consideration of the contract together with "other documents" such as preliminary design documents and mock lists. From the perspective of risk prevention and control, the later the project contracting stage, the more conducive it is to control investment risks. If there is a conflict between the content of the Employer's Requirements and other documents, the Employer shall consider the order of interpretation and the rules for handling conflicts, make them clear in the contract, and pay attention to the principle of fairness when considering the allocation of risks. The employer shall consider the "change and price adjustment" involved in the future signing and performance stage in the bidding stage to avoid the risk of invalid bidding due to substantive changes, and should try to give the bidder sufficient time to obtain a more rational bid**. Employer's Requirements" needs to ensure the accuracy of the original data and materials cited by the employer, the functional requirements for the project or any part thereof, the process arrangement or requirements for the project, the technical standards and requirements, the test and inspection standards and requirements, and the data and materials that cannot be verified by the contractor during the implementation process.
For bidders, in the bidding process, if it is found that the price and scope are not clear, and there is a conflict between the "Employer's Requirements" and "other documents", the bidder should take the initiative to ask the tenderer to clarify. The substantive response to the Employer's Requirements should be as detailed as possible and vague expressions should be avoided. If there is refinement, adjustment or supplementation of the "Employer's Requirements" in the bidding, the group price and pricing should be clarified, which will help avoid subsequent disputes.
Signing stage
Article 53 of the Tendering and Bidding Law (Draft for Comments) describes: "The tenderer and the winning bidder shall, within 30 days from the date of issuance of the notice of winning the bid, enter into a written contract in accordance with the bidding documents and the bidding documents of the winning bidder." The tenderer may negotiate the contract with the winning bidder, but the content of the negotiation shall not change the substantive content of the bidding documents and the bidding documents of the winning bidder. The tenderer and the winning bidder shall not enter into other agreements that deviate from the substantive content of the contract. Therefore, during the signing stage, both parties should avoid making "substantive changes" to the bidding documents. In particular, when the bidder responds to the "Employer's Requirements" document in the bidding documents, the relevant content in the bidding documents may constitute a further supplement and refinement of the "Employer's Requirements" in the bidding documents, and the content of such supplements and refinements shall also be reflected in the contract documents when signing the contract, and make clear agreements on the composition of the tender.
Fulfillment phase
During the project performance stage, special attention should be paid to the confirmation of the responsibility, quantity, and ** of the change of visa. In the traditional parallel contract awarding model, contractors often obtain profits in the mode of "low winning bids, diligent visas, and high claims". However, under the EPC model, the project adopts the form of "fixed total price", and the "change visa" in the performance process does not necessarily lead to the adjustment of the contract price. Therefore, in the EPC mode, in addition to confirming the objective facts and workload, the scope of the change, the relevant responsibilities, the increase or decrease of the costs involved, and whether the adjustment should be made as much as possible. On the one hand, this is more conducive to the smooth operation of the whole project, and on the other hand, it can effectively avoid a large number of disputes in the future.
Acceptance and settlement stage
If the contractor completes the project in full accordance with the content of the Employer's Requirements, then the employer must pay the contractor the full amount of the project price, which is the consideration for the obligation to perform the boundary and the project payment. However, in fact, many EPC projects cannot be 100% completed in the end, so both parties need to pay attention to the need to set the completion acceptance date according to the needs of the project, especially the different completion acceptance procedures of different types of projects (such as trial operation, post-completion test).It is necessary to set clear conditions and specific criteria to meet the requirements of the employer;For those who do not fully meet the requirements of the employer, different treatment standards are set, such as reasonable payment conditions and compensation conditions according to the nature of the project and the characteristics of the general contract.
*The "Employer's Requirements" for the general contracting of investment projects is an integral part of the bidding documents, and as an important annex to the special contract conditions for the general contracting of the project, it has the role of stipulating the "purpose of the contract" in terms of legal nature. Therefore, in the bidding stage, it is necessary to describe the requirements of the employer in the bidding documents in detail, comprehensively consider the contract awarding stage, contract terms and pricing methods and other influencing factors, so as to avoid disputes in the contract and other aspects in the process of project implementation due to the incomplete description of the employer's requirements, so as to ensure the smooth implementation of the project and give full play to the investment benefits faster and better.