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Offer– Can be withdrawn at any time– Must be capable of acceptance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