Category: Construction

Solar facility construction milestone and payment claim review

Large scale solar construction projects are typically made up of dozens of milestones, outlined in the contract, which need to be met before payments can be made to the contractor.  There are normally at least three parties involved in the processing of these payment claims, and they can cumbersome things to navigate.  This post looks at what the typical milestones in a solar project are and what documentation is important.

But first, a step back. To defining the milestones:

Prior to financial close (where the necessary contracts are executed, and financing is secured) there will likely be a bit of backwards and forwards on what the key project milestones will be, and how much of the overall lump sum contract price will be allocated to each.  The milestone schedule, payment schedule, project programme and financial model are all built and developed in parallel, and changing one may have an impact on the others.  The contractor is interested in making sure that they have healthy cashflow throughout the project.  Procurement activities in particular require a heavy outlay of cash, so they will want to get paid for completed procurement works, which typically take place towards the front end of the programme.  The owner, and lenders, will want to make sure that they are receiving value for these payments, so they will be interested in making sure that the payment amount is fair, given what works have been completed.

Some of the typical milestones (and therefore payment triggers) include the following:

Notice to proceed

This is a mobilisation payment, often made to the contractor upon the award of the contract.  For instance 10% of the contract price.  The evidence required from the contractor is typically a letter from the owner to the contractor confirming that they have permission to go ahead with the works under the contract and that any conditions precedent to them starting works have been met, or waived as required.  It may be accompanied by other documentation showing that the contractor has done all the necessary preparation works, such as securing insurance, accessing bank guarantees, appointing certain key personnel etc.  The level of complexity in assessing this milestone is very much dependent on the contract requirements, but it should not be overly complicated.

Equipment procurement

This shows that the contractor has place the orders for the equipment.  The evidence for these type of milestones is typically in an executed (and often redacted) contract with the equipment supplier.  Additional requirements may include the supplier’s quality management plan, factory acceptance test schedule, delivery plan, and transportation, storage and handling, and installation and operations & maintenance guidelines.  Reviewers should be checking that the specifications of what has been procured matches the contract employer’s requirements.  The product warranties should also match the contract.  Delivery schedules should be in line with the project schedule.  Key components and equipment in a solar facility included as milestones are typically PV modules, structures/trackers and inverters.

Equipment delivery

This is to demonstrate that the equipment procured has been successfully delivered.  These milestones should be accompanied by a lot of documentation.  This can be one of the most onerous milestone types and it’s very important that the contractor has good controls in place to make this easy to review.  For each equipment type, there should be a summary report which links actual equipment to containers or batches.  For instance, PV modules will likely be manufactured in batches.  Each PV module has a serial number, and these serial numbers are grouped together into pallets.  Which are grouped together into containers, which are grouped together into batches.  Which cumulatively make up the entire facility.

There should be documentation and reporting which allows someone to trace each module from the manufacturing line all the way to its delivery to site.  A summary report should be maintained, identifying the position of each container (ex-works, on a ship, at port, on site etc) and a reviewer should be able to identify which containers have been delivered to site.  This summary report should be supported by a myriad of documentation, including packing lists, waybills/bills of lading, serial number lists and delivery notes.  In addition, there should be factory acceptance test reports and any independent factory inspection reports provided, and any applicable certificates from the manufacturer.  The reviewer’s role here is not to go through everything in minute detail, but to carry out spot checks to verify that the contractor’s report is accurate, and that they are implementing proper logistical and document control throughout the whole process.  Site inspections are then often carried out to verify that the equipment is being delivered in good order and that the contractor is complying with the handling and storage guidelines.  It can be a big job, and messy and confusing paperwork makes it a whole lot bigger.

Keeping track of millions of components requires a lot of competent people doing competent people things
Keeping track of millions of components requires a lot of competent people doing competent people things
Construction completion

There are a lot of construction activities that can be considered for payment milestones: mobilisation to site, the completion of the boundary fence, access roads, O&M buildings and substations.  But it’s typically the repetitive activities that get most of the attention, which in the case of solar are largely piling, tracker installation, module installation and inverter (or MV power station) installation.

What’s important here is what is understood by both parties to be a completed construction activity?  On any project there will be some punch list activities that need to be closed out, but what is considered to be reasonable? Does everyone agree?  For electrical equipment, is it enough that the unit is physically in place or should it be connected, with cables plugged in?

How is the facility divided up into sections?  Is a milestone linked to an individual section of the facility?  Or can the contractor claim for a percentage of works completed, regardless of where the works are taking place.  Keep in mind that the first wave of construction activities can be fairly quick to do, but coming back and resolving quality issues, and closing off punch list items can take longer.

Quality documentation is the most important here, and what is inlcuded in the overall payment claim should match the contractor’s progress report, which, in turn, should align with the quality documentation.  Inspection and test plans (ITPs) should be followed, and there should be inspection and test checks that are provided.  Observations during walkarounds on site should align with the contractor’s quality documentation.

Mechanical Completion is often a key construction milestone.  For this, all construction activities should be completed, quality documentation should be available, the punchlist should be manageable, and not affect the facility’s performance or safety, the facility should be ready for commissioning, and all the little construction activities that may not have been included as individual milestones (such as the security system) should be in and ready to be commissioned.

Commissioning

Commissioning milestones may be separated into cold commissioning (commissioning activities that can be carried out before the facility is connected to the grid) and hot commissioning (after grid connection).  It is common that the owner, owner’s representative, independent or lender’s engineer may witness selected commissioning activities, to confirm that the data provided match the observations on site, and to verify that the contractor is following the commissioning plan.  But commissioning milestones are often overshadowed or substituted for major completion milestones, such as practical completion or even commercial operation.  These major milestones are influenced and informed by performance tests and grid compliance tests.

A portion of the contract price, such as 5%, is normally held for these milestones, and the contractor needs to demonstrate the facility’s performance and compliance with the network service provider/regulator/purchaser’s requirements.  The nature of tests to be conducted and paperwork to be provided is determined by the local regulatory requirements.

They will also need to show that the facility is able to perform, by applying the performance ratio (or equivalent) tests outlined in the contract.  Performance data should be provided for review, along with the application of calculations as defined in the contract, and any underperformance may be subject to performance liquidated damages.


I have worked on projects with nearly one hundred milestones, and others with only a few dozen.  What matters most is whether they are clearly defined, and whether the parties have agreed upfront what constitutes the completion of an activity and what information and documentation is required.  I couldn’t overstate the importance of having a session or two right at the beginning of the construction phase to clarify expectations as early as possible.

The tricky nature of design and construction overlap in solar projects

Design

Solar PV facilities have ever increasing pressure on construction timelines.  In theory they are fairly simple design and construct projects, and one of the major benefits of these facilities is that they can come online in a relatively short space of time, and start generating revenue quickly.

So standard processes and procedures used within the engineering sector may be put under increasing pressure, in order to realise an early commercial operation date.

In an ideal world, the facility design is carried out upfront.  Site investigations are conducted, studies are done, calculations are calculated and all of these feed into the design process.  Design docs are developed, and bundled up into neat and ordered packages, which are handed over to the owner for review and comment.  Once everyone has had their turn to check that the design is in good order, and fully compliant with standards and specs, equipment is procured, and construction management documentation, such as work method statements, are developed.  Controlled.  Organised.  And compliant.

The reality of these projects is vastly different.  Certain things are known from contract negotiation – which modules, mounting system and inverters will be used, what is the overall facility capacity, where are the roads going to be located.  Designs will also be nicked from previous projects, to save time and cost, altered and amended based on local conditions.  Everyone will be watching the procurement of long-lead items with a keen eye along with any other activity under the project’s critical path.

So it’s likely that the design will be put together in clumps and blobs.  Loosely bundled documents, with vague references to geotechnical reports and flood studies, will come through in a piecemeal fashion.  Often before it’s been reviewed internally by the contractor.  There is enormous pressure on the Owner to carry out their reviews and issue comments with no delay, as everyone’s watching the clock.  But this way of submitting documentation is onerous on an owner’s engineer.  It’s difficult to plan and allocate resources when you’re not sure when documents are going to come through.  It can be hard to keep the same people on the job, which means more time spent by your engineers getting up to speed with the contract specs.  And it can mean multiple iterations of your log of comments.  It chaotic, pressured and not a whole lot of fun.

So some things that are important:

  • When documents come through, the contractor should highlight any specific aspects of the design which may have an impact on the overall project schedule.  For instance, tracker system design, which needs to be reviewed against local standards may be important as equipment needs to be ordered.
  • The document register becomes an incredibly important tool.  It should be tracking what the latest version of the document is, what the changes were in this revision, when it was issued and what the current status is (issued for review, approval, construction etc)
  • Document control in general becomes incredibly important.
  • The document management system should be easy to use.  If you need to go into the system to download small bundles of documents frequently, then it needs to be easy to navigate and docs need to be easy to download.  Access should be easy to secure, so that people on the design review team can search for documents themselves.
  • Transmittals should include a list of documents included, along with the location of the document on the document management system, or direct links to the documents.
  • Construction documentation, such as inspection and test plans and work method statements, should be developed in parallel, so that when the design is agreed, the ITPs and WMSs are ready, and there is no delay to construction.
  • For very time constrained reviews, it may be appropriate to focus solely on the observations of non-compliance with either local standards or the contract specs.  Design preferences may need to be dropped.  This is for the owner to decide.  They are paying for the product and it is ultimately their decision as to whether they are going for a gold standard project, or a project that finishes on time.
  • The contract should transfer all design risk to the contractor.  If the owner comes across any non-compliance at any point, the contractor should be required to fix it.  Increased pressure on the design phase should not relieve the contractor of their obligations to deliver a compliant project.
  • The contractor should be fully in control of construction quality.  So that the owner can see that the facility is being built to spec, and that accelerated works have not resulted in a poor quality product.

It’s difficult.  There are competing pressures, multiple activities taking place at the same time, and all parties may have limited resources at their disposal.

What could possibly go wrong on a Solar PV project during construction? – Part 3

This post is the last (for now at least) in a three part series looking at some of the things that can go wrong during the construction of a solar PV facility. Part 1 of this topic looked at design, programme, labour and environmental conditions that could impact construction.  Part 2 focused on the importance of effective onsite management, including quality control, equipment management, housekeeping and safety.

External conditions/events

“The best laid plans of mice and men often go awry.”  No matter how carefully planned out a project is, progress will always be at the mercy of external events, outside the control of project teams.  Some events are possible to predict, and contingency plans, or mitigating plans can be created.  Other events come out of the blue, are totally unforeseen.

The contractor should be responsible for completing the project to the extent that they are able to control, or perhaps even influence, what is taking place.  But contracts will have ‘force majeure’ clauses included, to address what happens if something happens which is totally outside of the contractor’s control.

Regardless of who is responsible, works need to get back on track, and repair works or accelerated catch-up works may be required.

Weather conditions, like floods, heavy winds, lightning and hail, can lead to facility and equipment damage.  Material or equipment supply chain hold ups or shortages may occur (by way of example, a project that I worked on had their steel supplier’s factory burn down).  Permission to connect to the electrical grid can be delayed, through no fault of the contractor or employer.  Third party works may need to take place (for instance transmission lines, substations or access roads).  Third party inspections and/or approvals may be required.

Storm water management/drainage

This is closely linked to external events – as heavy rain is clearly a weather event.  And it is linked to the appropriateness of the design (which is discussed in Part 1.  But it’s important enough to merit its own mention.  Solar facilities are covered with impermeable, smooth, titled panels.  They act like a roof, without a gutter.  Rain runs off them easily, and, over time, this leaves little grooves in the ground beneath the bottom edge.  This water accumulates and then runs downhill.  Depending on the ground type (permeability), the facility slope and the amount of rain received, stormwater management can become an issue.  Moving water can erode away at ground, roads and earth surrounding the mounting structure base.  This is clearly an issue over the life of the plant, but the management of stormwater can also be a problem during construction if water rushes into trenches, washes away civil works, or affects other aspects of work.

It’s therefore important that the contractor is aware of rainfall patterns, and considers how stormwater will behave onsite.  Plans should be in place to manage the water, and drainage designs should consider protecting the facility both during construction, and over its operational life.

Access road degradation

For any equipment, people or materials to reach the site, it is naturally important that the facility can be accessed.  There is typically a portion of road, of varying length, linking public roads to the facility’s boundary.  It’s important that the responsibility for building and maintaining this road is clearly defined.  But regardless of who is responsible, this road will take quite a beating over the course of construction.  Trucks carrying modules, mounting structures, inverters, switchgear, concrete, and other components and materials will be travelling backwards and forwards for months.

If the road isn’t built properly, it will end up being heavily corrugated and can turn into a swamp with heavy rains.  This then affects the delivery of components and materials, and the accessibility of the site for people working there.  Because it’s outside of the site boundary, it can be overlooked, but can result in a logistical nightmare if it’s not built properly.

Connection quality

A problem for a number of projects in South Africa was in the power quality at the point of export.  Different countries have different connection requirements, which will be set out in the relevant codes, regulations and standards.  Equipment may be brought in from other countries, and designs carried out by foreign engineering professionals.  This can result in the facility not complying with the specified requirements.  Design adjustments, equipment tweaking or reprogramming and/or possible additional equipment may be required, and these may end up delaying the project.

It’s therefore clearly important that the designers are aware of local conditions and requirements, and design the facility appropriately.  Sufficient time for testing is also required, in case there are hiccups along the way.

Ground risk

The contract should define whether or not the contractor is liable for any sneaky surprises that may be lurking underground.  They will be develop their design according to the conditions that they have observed onsite.  The mounting structures, electrical equipment housing units and cable routing designs will all have been selected and developed accordingly.  If the actual conditions are different from than what was expected it can have an impact on the suitability of the design.  It’s therefore incredibly important that a thorough geotechnical assessment is carried out.

What could possibly go wrong on a Solar PV project during construction? – Part 2

Solar PV facilities should be fairly easy to build; the technology is not overly complicated, and the installation process should be a series of lego-like assembly.  So why does so much go wrong?  Part 1 of this topic looked at design, programme, labour and environmental conditions that could impact construction.  This post will look at the importance of effective onsite management.

Quality inspections / quality control

What should be included in the contractor’s contract is that all works are to be done to an acceptable level of quality, and that the contractor should be implementing a comprehensive quality assurance plan.  But PV facilities are made up of millions of components being installed, in addition to vast stretches of trenching being dug and filled, and other civil works taking place.  LV, MV and HV electrical works are on the go, and multiple teams are all working simultaneously, often within the same zone.  If the contractor doesn’t have their proverbial ducks in a row, construction works can be done sloppily, and without due care.

Step one is to ensure that before an activity begins the contractor makes sure that everyone has the right information.  Documentation control is incredibly important.  Have drawings and method statements been reviewed?  Is the document register updated?  Do all sub-contractors have the right plans?  Does everyone know what they’re supposed to do and how they’re supposed to do it?

If this important control is not in place, and people are working to the wrong plans or designs, trenches can go in the wrong place, concrete pours may need to be redone, modules may need to be removed and replaced, and so on.  An entire site can spiral into chaos if people don’t know what they’re meant to be doing.

But let’s assume that people have the right information.  There should then be detailed inspections and checks by the contractor’s quality team to make sure that the works delivered match the design.  Have cables been securely fastened?  Are bolts tightened?  Have all components been installed in accordance with the original equipment manufacturers’ requirements?  Are the pyranometers facing the right direction?

All of these tiny checks add up to two big important questions – is the facility safe to operate and can it operate as intended?

There should be a whole room full of files containing evidence of inspections.  Well, not quite, but the evidence should be there.  If the contractor isn’t recording their inspections and test results, it’s very difficult to be confident that they’re really in control of the facility’s overall quality.

If the employer is dissatisfied with the facility presented to them it can impact on whether milestone payments are made to the contractor, or whether the contractor can achieve practical completion (or whatever completion milestone is defined in the contract.)

This impacts on the project’s completion date, and if quality issues are not identified and then resolved, it can affect the facility’s operational efficiency and safety.  Not good.

Storage and handling of equipment

Some components, of the millions of components being used, will have requirements relating to the handling of equipment that could impact their warranties or how they perform in operation.  The importance of complying with these requirements cannot be overstated.

Equipment should be transported correctly, unloaded and then stored correctly.  It should be packaged suitably, and then, when the time comes to install it, it should be installed properly.  The facility design should ensure that the operational or environmental conditions will be within a range considered acceptable by the manufacturer.

If the contractor isn’t aware of these requirements, they won’t handle the equipment correctly and they run the risk of voiding warranties and affecting facility operation.  They also run the risk of damaging equipment so that replacements need to be ordered.  Some of the components on a PV site, especially made-to-order items, can have a very long lead time.

This can throw the project schedule off course.

General housekeeping

The condition of the site in general can be a good indicator of the contractor’s overall control of onsite activities.  Rubbish and litter lying around, concrete splatters, broken glass and piles of sand and rocks all provide an indication that small, but important, controls are not in place.  Inadequate housekeeping can also raise flags for the environmental officer or manager, who should be monitoring construction activities in accordance with the relevant environmental authorisation and/or environmental management plan.  Non-compliance with the EMP can result in onsite activities being stopped until the issue is corrected.

Safety

The contractor’s level of control of onsite activities will also have an impact on the safety of all persons working there.  There are multiple ways in which someone could really hurt themselves, or others.

  • PV modules sitting in the sun will be live.  Any person fiddling with the module, or with connectors, who may not know what they are doing could really injure themselves.
  • The same risk exists with other electrical equipment being used throughout the facility.
  • Heavy drilling and trenching machines may be operating and these naturally have the potential to injure someone quite seriously.
  • Anyone working near loud machinery should be wearing ear protection.
  • Fire is a concern on any PV facility.  Electrical fires or bush fires (particularly in drier climates) can occur.
  • Then there is a risk of other accidents happening.  People dropping equipment or material, or falling in holes, or misusing a tool, or even sunburn or heatstroke.

Injury or even death is a real risk, and it is up to the contractor to ensure that

  • safety considerations are emphasised during toolbox talks,
  • emergency procedures are in place and emergency equipment (like fire extinguishers) are available,
  • access controls are in place to prevent unauthorised persons from entering electrically active zones and
  • all workers are adequately trained before carrying out any activities.

There should be an appointed health and safety control officer, who is tasked with developing and implementing H&S procedures.  Any incidents or non-compliances should be taken seriously, and it’s important that safety is instilled within the site culture from the start of construction activities.