Change in Vendor, Change in Cost Is a Vendor Change a Material Change
In a recent EPC dispute between a contractor and a petrochemical company, LegaTech successfully helped the contractor secure compensation after a significant cost increase caused by a change in the vendor list.
The Dispute
The issue arose when a key piece of equipment for the project required mandatory approval from the project licensor. During the process, the licensor changed the approved vendor list. While the technology itself remained the same, the change in vendors led to a sharp cost increase of $7 million, placing the contractor in a challenging position.
The Contractor’s Claim: The contractor argued that the change in vendors constituted a material change, directly impacting costs. As such, they claimed compensation for the additional expense.
The Employer’s Response: The project owner (employer) disagreed, maintaining that there was no substantial change because the technology itself hadn’t changed only the vendor had.
This disagreement escalated and ultimately led to arbitration.
The Tribunal’s Decision
The arbitration tribunal thoroughly reviewed the facts of the case, including the contract terms and the licensor’s role in approving vendors. After careful consideration, the tribunal ruled in favor of the contractor. The key finding was that a change in the vendor list did qualify as a significant change under the contract, even if the technology itself remained unchanged. As a result, the contractor was entitled to compensation for the increased costs.
LegaTech’s Role
LegaTech played a critical role throughout the process, supporting the contractor at every stage:
Assisting in the preparation of detailed claim documents.
Building a strong, evidence-backed case.
Successfully defending the contractor’s position before the arbitration tribunal.
This case highlights the importance of recognizing that even seemingly minor changes like a vendor switch can have major financial implications in EPC projects. LegaTech’s expertise ensured that the contractor’s rights were protected and that they received the compensation they deserved