Page 248 - Sustainable On-Site CHP Systems Design, Construction, and Operations

CHAPTER 13

CHP Construction

Milton Meckler

he construction of a CHP plant may require undertaking considerable risks to all
parties involved. While most contractors are accustomed to dealing with risks,
Tfirst time or less experienced CHP plant owner-operators are generally less
informed about the risks they may encounter in the construction of a CHP project, and/
or concerning the role they must be expected to play on the project construction team
being assembled. This chapter is not intended to be a treatise on all the issues that con-
tactors must normally address but is intended to address those issues that should be of
principal concern in contractual relationships between contractor and their owner-
developer clients when constructing CHP plants.
Owner-operators and/or developers of CHP facilities must be made to understand
from the outset that their role during the construction of a project is as integral to its
success as that of the design engineer, architect, and contractor. In addition, owners
should also understand that there are virtually no risks on a construction project that
cannot be shifted among the contracting parties depending upon the type and terms of
the owner-contractor agreement. For example, an owner-operator may contractually be
required to assume the risks of unusually severe weather, unexpected subsurface
conditions, strikes at the turbine or engine supplier’s manufacturing plant, changes
in law or codes, increases in price, and delays to project completion associated with
such risks.
Accordingly, the CHP plant owner-operator and/or his prime general or mechanical
construction contractor must consider not only whether there is sufficient financing to
complete its construction, for example, but also be prepared to conduct a thorough risk
management review and analysis of the project structure and its contracting terms,
while incorporating the following principal goals, namely:

1. Identify the most significant risks faced.
2. Determine how such risks can either be mitigated or entirely eliminated.
3. Conduct an assessment of the financial exposure should one or more of the
major risks identified under (1) result.
The next section examines the steps that owner-operators and contractors of CHP
projects can employ when undertaking a risk management review.

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