Howard M. Steinberg is of counsel and a retired partner in the law firm Shearman & Sterling LLP and has more than 25 years of legal experience in the infrastructure sector in more than 100 countries. He is named a leading lawyer in project finance by Chambers & Partners and IFLR 1000. His new two-volume work, Understanding and Negotiating EPC Contracts, is available for pre-order here.
HOWARD M. STEINBERG is a former partner and now of counsel in the project development and finance group of the international law firm of Shearman & Sterling LLP.He concentrates on transactions involving the energy sector and focuses on the power industry in particular.Howard Steinberg has thirty-five years of experience concentrating on infrastructure transactions in over 100 countries.His primary focus is the contracts related to the business of the projects themselves.He has represented sponsors, offtakers, suppliers, contractors, operators, underwriters, multi-lateral agencies and lenders in the development, acquisition, restructuring and privatization of infrastructure projects around the world.He has had a chapter on Brazil featured in the book The Principles of Project Finance and articles in periodicals such as Power, Astronomy, the Institute for Energy Law’s “Energy Law Advisor” and Asia Law & Practice and is listed as a leading lawyer in project finance by Chambers Latin America and IFLR 1000.
Mr. Steinberg is a member of the New York State Bar, a member of the Advisory Board of the Institute for Energy Law based in Plano, Texas. He taught at Pace University and holds a J.D. from New York University School of Law, and M.B.A. from Columbia Business School and an A.B. from Columbia College, where he majored in philosophy and economics and graduated magna cum laude and Phi Beta Kappa.
Large infrastructure projects often attract the most visionary, intelligent and determined people from each of the various disciplines and professions involved. I wrote this book set because even with all these most talented of people many projects encounter serious and sometimes fatal problems. Some of these problems are beyond anyone’s power to control, but in my decades of experience, I have found that many of these grave problems could have been avoided entirely or at least mitigated.
The engineering, procurement and construction (EPC) contract is the battle plan for any infrastructure project. Obviously, those involved will have to battle the forces and laws of nature. Unfortunately, however, these unsuspecting participants often fall prey to ambushes created by landmines unwittingly planted by the project’s own organizers. These “secondary” risks often could have been prevented had the project’s organizers taken the time to surmise the natural and artificially created risks involved in the project and then allocated them to the project’s various participants. Without a good plan of action to organize and thus minimize the occurrence of these risks, unpreparedly, project participants may find themselves entrenched in skirmishes against one another. If this happens, everyone involved will suffer unnecessary disappointment and loss. My goal in writing this series is to help project participants avoid unnecessary damage tolls by showing them how an organized EPC contract can reduce the likelihood of confusion, disorganization and even sabotage in the project’s life cycle.
I hope readers of this series will see that experts are only as good as the plans they are given. Without an organized EPC contract, experts, too, are lost. Without an EPC contract that has squarely covered the risks that are typical in infrastructure projects, disaster is always just an event away.
EPC contracts can be thought of as homework for the project participants. If they are diligent and steadfast in their approach to composing the EPC contract, they are likely to be well-prepared for any test and therefore act with confidence in carrying out their duties. On the other hand, if the EPC contract has been hastily tied together in a few desperate “cram” sessions, poor performance or failure is a more likely consequence and therefore project participants tend to act defensively rather than cooperatively should risks materialize.
The most common misconception is that EPC contracts can shift burdens from one party to another entirely and protect a party from harm or loss. Almost without exception, this is not true. Risks that materialize affect all parties. True, one party may bear most of the financial consequences of a risk but all participants will suffer in various degrees. Believing that one’s right hand is out of danger if the left hand sustains a cut fails to take into account how inter-related the body (like an infrastructure project) really is. In general, the right hand will be safe unless the left hand doesn’t properly attend to its injury. An uninformed or nonchalant evaluation of the wound on the left hand may be the death nell for both hands. An infrastructure project is like a living organism, generally strong but not immune from risks whatever vaccines have been taken.