The declining oil price has been widely documented in recent times and we are still uncertain as to what is really happening in the market and what even the short term future will hold. One thing for certain is that current projects face increasing pressures from a feasibility and commercial risk perspective. This means that controlling costs and risks in any contract or project is a fundamentally important issue that we must all sharpen our skills towards.
Variation clauses will become increasingly important as contractors try to squeeze extra payments from the client whilst on the other hand clients may be utilising such clauses in order to reduce the quantity of works required. It is important that all parties on both sides of the fence fully understand the variations clauses in contracts that they are dealing with to understand the possibilities and ramifications.
Termination and suspension scenarios will also become more commonplace as the commercial foundations of a project are tested to straining point. Again all parties need to understand the situations in which a contract can be terminated and the associated compensation or cost.
It would be adding fuel to the fire if a party acted without the proper guidance or advice in the area contracts management particularly in such turbulent times.