In this blog, Jon Baker, construction and engineering director at law firm Freeths, discusses the impact of pushed back Gate 2 bids on project delivery and how developers can maintain project momentum despite delays.
Recent delays in bidding for Gate 2 network connections have put renewed pressure on project timelines. The first tranche offers, namely 26/27 protected transmission and large embedded projects, are now expected by mid-April 2026 and protected 26/27 distribution projects by the end of May 2026. But even these projects may eventually have their protected connection dates. delayed.
In the meantime, what can developers do to ensure a project is in the best possible condition when land offers and connection dates are confirmed?
There are several ways to “move forward” on a construction project before the main contracts are signed. Site setup, site execution, surveys, initial designs, engineering and pre-ordering are all activities that may be considered. In this article we outline some contractual approaches to consider, along with some risks to be aware of.
Early contractor involvement
Early contractor involvement is actually as simple as contacting a contractor early. There is a huge amount of industry commentary on this topic, including the pros and cons. Early contractor involvement takes many forms and can fall into the categories below. It also goes without saying that market engagement and a robust procurement process can also help to better understand key project risks and opportunities.
The NEC4 forms of contract (commonly used in Britain and which UK civil, facility works and ICP contractors may prefer) have their own optional early contractor involvement clause, X22, which provides some useful inspiration for early contractor involvement. X22 divides the contract into two phases that must be defined in the Scope of the contract (specification document). During the first phase, the contractor submits designs for acceptance and moves on to other matters, including the budget. Progression to phase two will require a notice to proceed.
While it’s difficult to provide a one-size-fits-all for early contractor involvement (if using NEC4 X22, consider the consequences of termination during phase one), X22’s approach to design development and an overall budget for the project is worth keeping in mind.
Letters of intent
When used properly, Letters of Intent (“LOI”) can play a valuable but limited role in allowing work to begin earlier than would otherwise be practical. They can enable early mobilization and procurement, allowing parties to manage inflationary pressures and secure materials.
Key risks include scope of scope, unclear liability limits and uncertainty of duration, all of which must be tightly controlled through a defined scope, a clear financial limit and a realistic due date linked to the execution of the main contract. Any extensions or variations must be formally recorded to reflect the contractual status of the parties’ agreements.
LOIs should always be treated as temporary arrangements while the main construction contract is completed, and should never replace it. If your lawyer shudders at the mere mention of an LOI, the reason is that case law contains many examples of where things can go wrong, as evidenced by the 2018 Arcadis case in which parties inadvertently created a binding contract through an LOI and subsequent performance, and then disputed whether the LOI contained a limit of liability.
Limited notice to proceed
Many projects with protected offers may also be about to commence or have already made progress in contract negotiations. Consider EPC, BOP or other contracts. A good option in such cases is to consider a limited notice to proceed (“LNTP“) to order a contractor to begin major activities.
The benefits of an LNTP include that all works supplied can be subject to a full range of contract terms, including all health and safety requirements, design and construction standards and warranties, and for example insurance requirements. The disadvantage of LNTP is the time it can take to appropriately separate the initial LNTP activities from the remaining works and to negotiate any terms that apply only to LNTP.
LNTPs can be useful when actual contract negotiations are nearing completion, or when the LNTP approach has been considered in the project program from the outset.
Making work agreements possible
A works authorization agreement or early works agreement generally refers to initial actual physical works. For example, terrain roads or access roads, the construction of wadis, or more drastic work or research on the site, such as extraction tests.
Facilitation works agreements do not need to cover the same level of complexity as a full EPC or BOP contract and can therefore be negotiated and implemented more quickly. NEC4’s short engineering construction contract could be a possible option for simple on-site work.
However, an order for supporting works is a fully operational construction contract. The terms must include all applicable provisions, requirements, standards and policies for carrying out construction work, unlike a pre-construction services agreement (see below).
Pre-construction services agreements
As the name suggests, Pre-Construction Services Agreements (“PCSAs”) are typically used to provide services prior to entering into the main works contract. PCSAs can be part of a two-stage procurement process for larger, more complex projects where design, constructability, programming, technical advice and detailed cost information are required from a potential contractor before the main contract is signed. PCSAs can take the form of a relatively simple consultant arrangement where the parties continue to work together under the subsequent EPC contracts, or they can be more detailed to set out the terms of the main construction contract.
Order long-term items
Perhaps the most challenging issue related to external early project delays is equipment ordering and lead times. When can you commit to ordering panels, battery modules, inverters, transformers, etc. if you don’t know when a project can be commissioned or commercially operational?
The impact of lead times on the construction program and competition in the equipment market will both exert pressure to place orders more quickly. On the other hand, keep in mind that when equipment is ordered, lead times begin to shorten, which can lead to additional storage costs and even warranty periods that begin at the time the equipment is delivered – even before it is put into service.
Arrangements for long-term items may be covered in construction contracts or stand-alone purchasing contracts for long-term items. From a developer’s perspective, advanced ordering likely means paying up front. To fill the gap caused by the need to deposit money before receiving the goods, typical protection measures include advance payment guarantees, unconditional certificates and the transferability of supply contracts. A contractor placing orders with its supply chain must consider the same issues. Contractors will also want to ensure that cash flow under the main contract is in line with payments for goods and materials and should ensure they avoid the fate of a contractor in a recent case in Trinidad and Tobago, who had to pay a 30% cancellation fee for equipment.
The right approach to early project development, especially in the context of grid connection challenges, means that the risks and issues mentioned above, as well as many others, are considered and carefully addressed. A strong purchasing and contracting strategy can reduce these risks and increase the likelihood of project success.
