CONFLICT AVOIDANCE
- Three Important Lessons
23 September 2010
The Speaker
Paul Bennett MSc FCIOB MCIArb
21 years engineering / construction experience on projects in UK & Europe
Building, Power, Process, Offshore, Rail, Marine, Engineering Construction
Blake Newport Senior Consultant 1997 to date
Past CIOB Centre Chair
Five essentials of a valid Contract
Contract Formation
Acceptance– Crystallisation of Contract; the ‘hammer’ falling– Communicate in writing is “BEST PRACTICE”– Unqualified acceptance of offer (Substantially)
Offer– Can be withdrawn at any time– Must be capable of acceptance
Intention to form legal relations
Capacity
Consideration– Benefit - usually money
Beware of the pitfalls: Counter-Offers
– Perhaps looking like acceptance– Qualified acceptance may not be counter-offer– Be careful with language
Battle of the Forms– Last man standing: ours / yours / ours / yours / etc.– Unqualified acceptance of offer (Substantially)
Conduct– Actions and reliance may imply acceptance– Ask yourself: Is there a contract?
Contract Formation
Letters of Intent are a topic in themselves
Usually, a Letter of Intent merely expresses an intention to enter into a contract in the future, and creates no contractual liability.
It is a question upon the facts of each case whether a Letter of Intent gives rise to any, and if so, what liability.
Case study – EFW Plant £40M Civils Package
Letters of Intent
The Contract
The five main elements of the Contract?
Scope of Work What & Where?
Specification How?
Programme When - Start, Finish, Key Dates?
Price Why?
Terms and Conditions THE RULES OF THE GAME!
Formation of Contract
The Contract creates obligations and transfers risks
between parties
31 standard forms (JCT, ACA, ICE, NEC, MF/1, IChemE etc.) – ICE to adopt NEC
Identify your risks and obligations
Know your Contract.
Formation of Contract
Case Study – The Trust’s New Exhaust Stack
JCT 2005 Design & Build
£350K Stack Replacement
Employer’s Requirements
- the ‘loose vermiculite infill’
Contractor’s Proposals
Conduct of CA
The ‘Property Lawyer’
Variation or Obligation?
The ‘Loose’ Fill Lining
The New Exhaust Stack
The Outcome - Resolved
When all else fails
Corrected contract administration (obligation)
Notice of Adjudication
Proceedings suspended – settled
Recovery Ratio 4/1
Scope
Understand the scope of the works so that changes to it can be identified / quantified
The scope is what is contained in the Contract! What documents constitute the scope?
The scope is NOT:– what is in the bid– the same as the last job– what we heard at the coffee machine!
Understand The Contract
Programme
Both parties have obligations in terms of time under the
Contract:
Contractor: to build the project to a pre-determined time with penalties for delay and to proceed regularly and diligently.
Client / Sub-Contractor: provide access, information, equipment, services to allow Contractor to complete their obligations.
Understand the Contract
Disputes– Understand the Contractual provisions for the resolution of
Disputes– Understand the procedures for the application and resolution of
the particular Dispute forum undertaken– Termination - Summarily for cause?, On notice for cause?,
Without cause on notice?
Claims - must be proven: burden of proof?– Evaluation– Submission– Negotiation
Variations are priced.
Key Administration Processes
Contract Administration
Frequently used site records include:
Emails Meeting Minutes Programmes Variation Orders Progress Reports to Client Site Logs Site Diaries Head Office Staff Involvement
Photographs Timesheets Allocation Sheets Drawing Registers Reports Site Instructions Delay Notices Invoices.
Records must be relevant, organised, referenced, contemporary and secure.
Contract Administration
Time Management
Monitor Programme
Identify Delays
Inform other party by Notice
Identify measures to mitigate delays
Maintain detailed records
Re-programme and re-budget
Accelerate at your risk (every £ spent is at risk).
Case Study – The Fire Damaged School
JCT IFC98 with SCS and JCT98 CDP
£2M
37 wk planned completion takes 74 wks
Sectional Completion
LAD’s
The Employer’s Contract Design
Project ‘Doomed’ to fail
The As Built Design
The Outcome - Resolved
When all else fails
Contract Administration Corrected
Litigation (Public Purse: 3rd Party Decisions)
Pre-Action Protocol
Mediation
Recovery Ratio 2/1
Management of the Client (Employer)
and
his Engineer / CA / Architect
Managing the Client
In the event of a change the client is in an advantageous
position
You must avoid the temptation to “just get on with it”. The client may try to manipulate you into doing this for various reasons
Look to the contract. There will be provisions for dealing with changes.
You must stand your ground and be contractually robust
Case Study – The New Build School
JCT 98
£10M
Sectional Completion (1000 pupils + 500 pupils)
55 wks planned -v- 78 wks actual
A ‘failed’ Adjudication!
Approx Quants / Prov Sums
Original Phasing ‘red-herring’
Revised Phasing ‘red-herring’
The Outcome - Resolved
When all else fails
Contract administration corrected Arbitration proceedings commenced Parallel negotiations resulted in settlement
Recovery ratio 3/1
THREE IMPORTANT LESSONS
Three Important Lessons
Max Abrahamson in his 1973 book ‘Engineering Law and the ICE Contract’ wrote,
“A party to a dispute, particularly if there is arbitration, will learn three lessons (often too late): the importance of
records, the importance of records and the importance of records.”
These words remain true today Organisations still struggle with the issue that it is the Claimant
who must keep the necessary records to evidence the cause and effect of the delay (loss)
Unexpected grounds can be found to cast doubt on evidence that is not backed up by meticulously established records.
Beware of being “too helpful”
– If an instruction has not been provided by the client do not do any work without one
– Failure to have a written instruction to do work can result in the opportunity for both additional cost and time to be lost.
Important Lessons
Be careful what you write
– Poor control over email communication can lead to significant problems
– The issue of email “chains” can change the meaning of the original email
– Poor copy control may result in emails finding their way to unintended recipients.
Important Lessons
Email is a powerful communication tool but needs to be controlled
Awareness of Contract Scope– Be aware of the contract you are working to– It is unlikely to be a carbon copy of the last one and you may be
required to do something different.
Obligations of other Parties to the Contract – Understand what the Employer and / or other parties to the
contract are required to do in order to support the project– Understand how this relates to your own obligations.
All members of the project team should have an understanding of the obligations to be discharged
Important Lessons
Record the performance of other Parties
– If one of the other Parties to the project has not performed according to his obligations, ensure that this is formally recorded
– Their lack of performance is a “broken promise” which may result in additional cost to you.
Preserve your contractual position by recording the performance of other parties
Important Lessons
Disruption to your work by others
– If your action cannot be undertaken efficiently because of the lack of delivery by others, record the incidence of disruption / delay
– If you do identify disruption / delay, flag it up immediately.
Don’t be controlled or affected by the inefficiencies of others
Important Lessons
Don’t be afraid to raise the alarm
– If something seems unusual (or feels unreasonable), flag it up internally so a decision can be taken as to whether it is raised externally
– Your action may help to resolve a problem by dealing with the root cause
– You may help to ensure that you are paid for disruption and / or
additional work.
Early warning of a problem is critical to its effective solution
Important Lessons
Confirm things in writing– Oral agreements / understandings are of little use if one party
to the agreement subsequently “forgets”
Avoid “the Sahara syndrome” – “The only things that are relevant are what has been written
and what has been built…What is said is blown away like sand in the desert”
Oral agreements / arrangements need to be confirmed in writingBeware - some standard forms do not contain an ‘oral instruction’ mechanism
Important Lessons
Conflict – Mega Projects
Jubilee Line Extension £1.8Bn to £3.5Bn
£762M Wembley Stadium
- Multiplex and Cleveland Bridge ratio - £22M spent : £6M
recovered.
Scottish Parliament £50M to £431M
- Lord Fraser’s report is fascinating
The End
Thank You
www.blakenewport.co.uk