Force Account

Force Account: A Last Resort in Oil & Gas Projects

Force account is a term frequently used in the oil & gas industry, specifically within the context of contracts and project management. It essentially represents a last resort when standard contractual methods for completing work have failed or are proving to be ineffective.

Here's a breakdown of the term and its implications:

What is Force Account?

• Definition: Force account refers to a situation where the owner of a project takes direct control of completing specific work items, typically after a contractor has failed to perform as per the contract.
• How it works: The owner directly hires labor, purchases materials, and manages the work using its own personnel. This essentially means the owner becomes the contractor for that specific task.
• Purpose: Force account is employed when a contractor has:
  • Failed to meet deadlines: Delays have become unacceptable, and the project is significantly behind schedule.
  • Experienced budget overruns: The cost of the project is spiraling out of control due to the contractor's inefficiencies.
  • Failed to meet quality standards: The contractor's work consistently falls below acceptable standards, compromising the safety or functionality of the project.

Differences from Day Work Account:

• Scope: Day work accounts are more often used for minor, unforeseen work items that arise during a project. Force account, on the other hand, typically applies to larger, more complex tasks that require significant resources.
• Control: Day work account may give the owner some oversight, but the contractor usually retains primary control over the work. With force account, the owner takes full control, hiring personnel, managing logistics, and making all decisions.
• Cost: Day work account usually involves a pre-determined hourly rate for labor and materials, plus a markup for the contractor's overhead. Force account involves the owner directly bearing the costs of labor, materials, and any additional expenses.

Consequences and Considerations:

• Risk: Shifting to a force account can be risky for the owner. It involves assuming responsibility for tasks that were initially entrusted to the contractor. This can lead to increased costs and potential delays if the owner lacks experience in the specific work involved.
• Contractual implications: Contracts often specify conditions under which a force account can be invoked. It's important to carefully review these clauses and ensure proper documentation is in place before initiating a force account.
• Relationship with the contractor: Utilizing a force account can strain the relationship between the owner and the contractor. It essentially signifies a loss of trust and potentially sets a precedent for future conflicts.

In Conclusion:

Force account is a tool used in the oil & gas industry as a last resort when standard contracting methods fail to deliver desired results. While it can provide the owner with greater control over project execution, it also comes with inherent risks and potential consequences. Careful consideration and thorough documentation are essential before resorting to a force account.