Currently, in the field of engineering construction, many enterprises have the ability to participate in international competition in terms of financial strength. However, due to being in a specific social environment for a long time, whether in terms of ideological concepts or specific operational levels, there are natural defects in their ability to participate in international competition and make profits, especially some large state-owned enterprises. Then, from the perspective of law and management, what key problems need to be solved when Chinese enterprises enter the international engineering construction market and embrace green development? Undertaking international projects requires an in-depth investigation of the construction environment of the project, with a focus on understanding the legal environment, political and commercial behavior relationships, and other soft environments in the host country. Whether it is a domestic or international project, site investigation during the bidding process is an extremely important link. Especially for international projects, the investigation focuses not only on the "hard environment" such as construction conditions like "three utilities and one leveling", labor force, and material prices that need to be understood in domestic projects, but also more importantly, on the "soft environment" such as the legal environment, humanistic and public psychology, the influence of government officials on business activities, legal systems, etc., in the host country. If the "soft environment" is not carefully investigated and analyzed, it may very likely lead to the failure of the construction project.
For example: In September 2009, Company A won the bid for the A2 highway from Warsaw, Poland, to Berlin, Germany. Due to the urgency of securing the order, the company signed a contract with the Polish Road Administration without prior detailed topographic exploration or research on local laws, economic, and political environments. This resulted in the inability to obtain compensation from the Polish Road Administration under circumstances of cost increases, project changes, and delays. Coupled with out-of-control management, poor communication, and internal conflicts, by June 2011, the Polish Road Administration issued a claim requirement and fine of up to 7.41 billion zlotys (approximately RMB 17.51 billion). Additionally, due to large arrears of project payments and material costs owed to local Polish subcontractors, it led to protests and violent events such as burning and smashing office premises by subcontractors and material suppliers. As a result, B Company, the Polish partner, was forced to declare bankruptcy.
Due to road projects involving a wide range, the construction of the project is not only related to natural factors such as geography and climate at the construction location but also has a significant relationship with local environmental protection laws. Taking the Polish A2 highway as an example, the project once caused a significant increase in costs and seriously affected the schedule due to local environmental protection work such as "rain frogs." Some engineering managers of Company A even believed that the Poles were deliberately "making trouble," which is a typical manifestation of not strictly investigating and evaluating local laws and construction environments.
Special attention should be paid to contract terms and contract negotiations. Currently, many owners, especially those with government backgrounds, generally resent and are impatient with contractors' "bargaining" in contract negotiations. Therefore, contractors' negotiation abilities are getting weaker, and they gradually lose sensitivity to "unreasonable clauses" in contracts. This is actually an abnormal phenomenon and also a major drawback in China's engineering construction field. In Western countries with relatively sound legal systems, "prolonged negotiations" in contract negotiations are normal, and unconditional acceptance by contractors is instead abnormal.
In the Polish A2 highway project, the Polish side had already reminded that the contract terms were "modified FIDIC clauses," but Company A did not take it seriously and did not conduct a thorough study of the contract and its terms. When problems arose during the performance of the contract, it was found that many clauses favorable to the contractor had been deleted from the contract. Moreover, the Polish owner added some clauses in the contract to restrict the rights of the contractor. Since the contract had already made explicit provisions, subsequent negotiations with the Polish side were too late, and the Polish side's response was: everything follows the contract.
From a technical contract perspective, fixed-price contracts in large-scale projects with longer durations pose significant risks to contractors. If the total package price is locked, as a balancing mechanism for risk, the conditions and procedures for adjusting the contract price must also be clearly specified in the contract. Without these specifications, when the market experiences substantial increases in material prices or labor costs or unforeseen cost-increasing factors at the time of bidding, the path to adjust the contract price will be blocked.
In fact, the above issues should have been resolved during the contract negotiation process. In the relatively complete European market, prolonged contract negotiations can be fully accepted by the owner. However, due to long-term setbacks in the domestic market, Chinese contractors have lost the awareness of contract negotiations and cannot get over this mental hurdle, which is the most frightening aspect.
Particular emphasis should be placed on contract management during the performance process. Chinese owners are generally quite dominant, and this situation has political, economic, cultural, and historical inevitability. From a legal perspective, achieving complete equality in the legal status of contracting parties in the construction engineering field still has a long way to go. Therefore, normal claims in China's current construction engineering field are exceptionally difficult, and Chinese contractors have gradually lost the awareness of claims during long-term setbacks.
The completion of claims is a specific manifestation of the refinement of contract management because obtaining claim evidence must be conditioned on perfect contract management in project management. In other words: how well contract management is handled, claims serve as a litmus test. Of course, changes are also an important part of contract management. Changes essentially involve amendments to the original contract, and the scope of the original contract often leads to significant disputes in EPC contracts and DB contracts. This requires professionals to manage contracts so that changes can proceed smoothly.