Performance Testing - When, What and How?

Performance testing is often used by project owners and financiers to provide protection from, or assessment of, technical aspects of project design, procurement, construction and commissioning. The performance tests can range from comprehensive performance warranties relating to process performance and production in the case of lump sum turn key (LSTK) projects to less onerous demonstration tests for cost reimbursable contracts. This paper will discuss performance testing from both the contractorÆs and ownerÆs perspectives and focuses on: when performance tests are required, what type of performance test/warranty is optimum for each type of project, and how project performance should be evaluated. The requirement for performance testing can be driven by the project financiers, particularly in the case of smaller resource development companies. In such cases, differentiation between ownerÆs risk and contractorÆs risk can become contentious. At the other end of the spectrum, larger mining houses may choose to heavily influence the engineering and design process with the contractor supplying services on a reimbursable basis. In that case, the performance testing process is often limited to demonstration tests that validate performance for the ownerÆs corporate governance requirements. This paper was prepared due to the lack of published benchmarking of performance testing and the resultant differences in expectations between a contractor and a project owner that often surface late in the contract negotiation process. The paper provides a checklist of requirements for both the owner and the contractor that may be used to provide æcommon purposeÆ early in the contract negotiation process.