We continue this newsletter because we continue to see bad projects
We don't have a particular theme this month, but we do want to make the general observation that we continue to see poorly executed projects, a symptom that tells us our work is not done.
What do we see as the top causes of poorly executed projects?
Probably the number one issue is operations people with no experience in capital project management taking on a capital project as manager ("How hard can it be?" they say). Well, it is as hard as running a paper machine with no experience.
Then there is the fantasy project. Everyone gets together and says, "We have a great new idea on how to execute this project!" Believe me, you don't have a great new idea. At this point it is safe to say that everything that can be tried has been tried and many "great idea" techniques have failed.
Third, we see a never ending stream of poorly written contracts. Spend time correctly writing a contract and life will be easier, assuming you got the scope right to start with. Contracts should not be written by engineers or lawyers; they should be written by engineers and lawyers working together as a team.
Back to our regularly scheduled programming next month.
Contract Review: What to Look For
by Scott Witzigreuter, Attorney
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Scott Witzigreuter's civil litigation practice focuses on construction litigation and commercial contract litigation. He is a partner at the law firm Weinberg, Wheeler, Hudgins, Gunn & Dial.
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When entering into contracts with outside consultants, engineers or contractors, three types of contract provisions garner the most attention from a legal standpoint: dispute resolution clauses; indemnification provisions; and waiver of consequential damages/limitation of liability provisions. Simply stated, during contract review, these are the three clauses a lawyer looks for first because these are the threes clauses that most often and directly impact the resolution of a dispute.
These types of clauses may not be the most significant for purposes of completing the actual project. Contract language that defines scope, schedule considerations and change order management are more important for actually progressing the work. Dispute resolution, indemnification and liability limitations become significantly more important after the project is completed and in the unfortunate event that a dispute arises between the mill and its consultant, engineer or contractor.
Dispute resolution provisions are those provisions in the contract that determine how the parties intend to notify, discuss and resolve a dispute from first notice through arbitration or litigation. These provisions typically include informal negotiation/settlement conference provisions, mediation provisions and provisions that determine whether the parties will ultimately arbitrate or litigate a dispute via a formal lawsuit with a trial.
The time involved, the costs expended and the effort required in complying with each of these four types of dispute resolution provisions increases with each successive one. For example, an informal negotiation/settlement conference provision affords the parties the opportunity to resolve the dispute without the benefit of any third parties and in a much quicker timeframe. Obviously, this leads to a cheaper, faster and less complicated dispute resolution. By contrast, a contract that requires formal litigation via the institution of a lawsuit usually results in a dispute resolution that is the most timely, the most expensive and the most complicated. The mill, its contractors and engineers must develop a plan for resolving disputes prior to contract execution and ensure that the contract reflects this plan via the implementation of these types of provisions.
Provisions that limit the parties' liability include waiver of consequential damages provisions and general limitations of liability provisions. Consequential damages are defined as damages "such as are not produced without the concurrence of some other event attributable to the same origin or cause; such damage, loss or injury does not flow directly and immediately from the action of the party, but only from the consequences or results of such act. The term may include damage which is so remote as to not be actual." 25 C.J.S., Damages at �2 at 617 (1966). In effect, a provision that waives consequential damages precludes liability on the part of the contractor, engineer, consultant or the mill for lost profits, lost revenue, lost productivity costs, additional financing necessary to complete a project or increased costs of operation due to the poor performance or poor design of a project.
While waiver of consequential damages provisions are limited in terms of the types of damages they preclude, general limitation of liability provisions encompass all types of damages including consequential damages, direct damages, liquidated damages and generally attorneys' fees and interest. A limitation of liability provision is a provision that caps the maximum amount of damages that a party can be subject to for any type of dispute, under any theory of recovery (tort, contract, statutory). These types of damages are not limited as to type. These provisions can limit liability by placing a cap on the total amount of damages that can be assessed against a party; e.g., the party will not be liable for more than $2 million worth of damages.
More commonly, however, limitation of liability provisions provide a cap on damages using the compensation received by the party as the primary factor for determining the cap. Usually, these types of limitation of liability provisions can be found in engineer's contracts that limit the amount of liability the engineer can be responsible for to the amount of total compensation received by the engineer, or as a factor of the total amount of compensation received by the engineer.
With respect to both consequential damages provisions and limitation of liability provisions, these provisions must be clear and unambiguous in the contract documents. Stated differently, these provisions should be written in such a manner that a lay person with no legal training can decipher the meaning of the provision and fully understand it prior to executing the contract.
The third and final provisions with the most direct legal impact are indemnification provisions. These are sometimes called "hold harmless provision" or "hold harmless agreements." An indemnification provision is a contract provision that shifts the risk of loss from one party to the other. These provisions typically include language that requires one party to pay for the damages incurred by another party arising from a negligent act or omission, and for one party to provide a defense to another party subject to a claim for damages.
Indemnification provisions can vary from onerous to fair. Onerous indemnification provisions often require one party to provide indemnification even for the negligent acts of the party to be indemnified. A more fair indemnification provision requires a party to indemnify another party only for those negligent acts or omissions committed by the party who was providing indemnification.
In summary, a review of a contract for purposes of any potential legal impact should begin with identifying and understanding the three types of provisions. Thereafter, the contracting entities must ensure that these provisions result in a reasoned plan for resolving disputes in the most cost efficient and timely manner as possible, depending on the preferences of each contracting entity.
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Engineering Manager of the Year, call for nominations
We are looking for an individual who has done an extraordinary project, one that almost defies belief. Its extraordinary features can be schedule, technology, cost or all three.
We have often gotten nominees that go something like this, "I nominate Joe because he has done a great job of running our engineering department for the last fifteen years." Quite frankly, we are not interested in such nominees.
However, if you know someone who has led a very exceptional project in the recent past (the last two or three years), we want to know about it. We want to honor them and hold them up as an example for Engineering Managers in every pulp and paper mill around the world.
Just send your nomination, with as much details as you can provide, to [email protected]. We will seriously consider it.
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Current Patent Activity is available here.
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Capital Arguments Engineering Manager of the Year
Hall of Fame
 Since its inception, Capital Arguments has believed extraordinary projects are possible. They can be done safely, responsibly and offer a great advantage to their mills with lower capital costs and saved downtime. We established this award in 2008 to recognize those people and companies that follow this philosophy. This award is given once per year somewhere in the world. We honor our inductees permanently here.________Mac Switkowski--Engineering Manager of the Year 2015
Mac Switkowski, center, holds his Capital Arguments Engineering Manager of the Year Award that was presented by Paperitalo CEO Jim Thompson, left, as Luis Henao, right, vice president at Pratt Industries applauds. Mac brought the new mill at Valparaiso in on time and on budget despite a change of paper machine suppliers mid project.
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Not Awarded 2014
You have to be really good to get this award. We did not receive any qualifying nominations in 2014.
________ Not Awarded 2013
You have to be really good to get this award. We did not receive any qualifying nominations in 2013.________ Not Awarded 2012
You have to be really good to get this award. We did not receive any qualifying nominations in 2012.
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Ed Kersey--Engineering Manager of the Year 2011
Jim presents Ed with the Engineering Manager of the Year for 2011. (L - R) Matt Nilsen, Jim Thompson, Ed Kersey and Wayne South. Nilsen is Account Manager and South is Business Development Manager for Kadant Black Clawson, underwriter of this year's award. Ed Managed the construction of the Pratt Industries mill in Shreveport, Louisiana which took 13 months from piling to paper on the reel. His reward? They made him mill manager!
Kadant Black Clawson was a major sponsor of the 2011 Award. Here, on the left, Peter Flynn, President of Kadant Black Clawson, receives the company's duplicate of Ed's Award from Steve Roush, Publisher and Editor, Paperitalo Publications.
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Not Awarded 2010
You have to be really good to get this award. We did not receive any qualifying nominations in 2010.
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Dean Abrams--Engineering Manager of the Year 2009
Now retired, Dean was an engineer at Corrugated Services, Forney, Texas, USA in the summer of 2009 when he completed his award winning project. Dean managed a team that installed a secondary headbox in 11 hours, 30 minutes, paper-to-paper. The experts had said it would take at least 3 days. In April 2010, we presented the award to Dean in the presence of a number of his colleagues.
 Here is the award we presented to Dean:
Mike Ahcan--Engineering Manager of the Year 2008
Mike works at the UPM Blandin Mill in Grand Rapids, Minnesota, USA. In 2008, the mill's sole effluent pipe, running outside a building, almost in the Mississippi River, was determined to be in a state of imminent collapse. The experts said it would take a week of total mill downtime to replace it. Additionally, there was a danger of leakage into the river. Mike and his team went to work and replaced the pipe without any downtime and with no spillage. We had a banquet in Grand Rapids for him in July 2009.
And here is Mike's award:
We normally accept nominations in the November-December time frame. They can be sent to [email protected] with "EMOY Nomination" in the subject line.
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