Biotechnologies, like other new to the market process technologies, often do not have proven track records of commercial-scale operations in revenue-positive facilities. And because they lack a performance history and commercial references, the risk of employing new biotechnology is seen as high. To mitigate new technology risk, project developers and plant owners often employ one or more of the following: 1) efficacy insurance, 2) EPC wraps, and 3) performance guarantees. This article focuses on the latter, which commonly are offered by suppliers of first-of-kind (or other early edition) commercial-scale biotechnologies to facilitate initial deployments.
Performance guarantees are typically found in attachments or exhibits to license or supply agreements. They detail the process metrics that technology must meet and penalties for failure to achieve these targets. While this sounds straightforward, it rarely is. The performance of biotechnologies is often dependent on upstream processes and production of high-quality final products often entails downstream processing. This leaves the subject technology at risk to both input/feedstock variation, which is common for bio-based processes, and performance constraints from capacities and capabilities of downstream equipment.
Effectively writing and negotiating the results of process guarantees requires experience with the subject technology, negotiation skills, and contract know-how. Expertise is also required when enforcing or defending guarantees in the event of performance shortfalls. Important aspects to consider include the following:
- Key process metrics (capacity, conversion, yield, etc.) that are readily measured and will objectively gauge performance; at times, extra sensors and meters need to be added to enable performance monitoring
- Level of performance that will be guaranteed, typically X% of design performance
- Feedstock quality or upstream requirements (composition, humidity/dryness, pressure, temperature, etc.) that must be met
- Procedure for performance testing including timing, duration, and key process parameters that must be met to qualify the test
- Penalty or penalties associated with failing to meet performance targets
- Personnel and other observers that will be on-site to witness performance test
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Look at our 150+ experts and the services we provide. Most of our experts are also available to advise and serve as expert witnesses in bioeconomy litigation matters. For the larger projects, we specialize in putting together full-service, interdisciplinary teams with one point of contact. See the video about LEC here. Call us at 1+ (501) 833-8511 or email us for more information.