Avoiding disputes to deliver success

What types of problem can escalate into disputes?

Richard Bayfield FICE FCIArb (www.richardbayfield.com)

Ice.org.uk

Adjudicators Workshop – Jan 2008

Construction now familiar with “lessons learned workshop” but 2012 will be too late – T5 / Wembley / Emirates will be relevant

Workshop - approx 40 ICE Adjudicators present – following questions asked:

Who has NEC experience – as a Construction Professional? – and as an Adjudicator / Disputologist?

What disputed issues have you been involved with as an Adjudicator and / or Advisor under NEC?

What advice would you give to reduce potential disputes before 2012?

What do you think are the key 2012 risks?

Construction Industry – History 1 of 2

Construction Industry – History 2 of 2

Feedback

• Extension of time • Programme Information (Absent)• Resource Information (Absent)• Contract Data (Missing / Incomplete)• Works Information (Missing / Incomplete)• Non-compliance with Compensation event procedures – time limits• Non-compliance with Compensation event procedures – Project

Manager• Valuation of Compensation Event• i.e. Lack of knowledge by all parties

What issues have you been involved with as an Adjudicator and / or Advisor under NEC? - 1

Feedback

• PM absents him/her self (i.e. does not get involved, avoids issues / problems – e.g. does not approve a programme or else rejects a programme without any reason)

• Non adherence to “time limits” for reply within contract – 7 days Does not carry out his / her role under the contract

• i.e. - Project Manager Failure

• Contract assumes design is complete when it is not – result is 1000’s of compensation events –c.f. global claim

• Mis-apply / mis-understand Targets (e.g. lane rental bonus)• Contract amendments (e.g. use of “contract data 3”)• Effect of decision of external auditor• i.e. - Strategic Failure

What issues have you been involved with as an Adjudicator and / or Advisor under NEC? – 2

Feedback

• Valuation of Compensation Event (after disagreement between Contractor and Project Manager)

• Matters which were not addressed within the contract negotiation and contract documents – matters not anticipated by either party

• Falling out between 2 key individuals• Financial difficulty• External Factors – Politics / Environment / Economics / Social /

Technical (PEST Factors)• i.e. – “Unavoidable” dispute issues above• Whereas “lack of knowledge, PM failure and strategic failure”

disputes are all largely preventable

What issues have you been involved with as an Adjudicator and / or Advisor under NEC? – 3

Adjudicator workshop Key Risks 1

• Modifying contract without understanding effect• Lack of resources• Competence (lack of) – importance of good people / teams / project

management• Design changes (not managed / wrong contract form)• Insufficient time before 2012 – poor programme management• Ground conditions (adverse)• Poor quality• Supply chain – not “back to back” – not “integrated”• i.e. INTERNAL (to construction delivery team)

Adjudicator workshop Key Risks 2

• Change of Mayor (and change of Policy) – Politics• Terrorism• Oil shortage / price £ / $ – economy – inflation• Stake Holder Management• Industrial Action• Change in Law• i.e. EXTERNAL (to construction delivery team)

Advice to ODA

Countermeasures to key risks:

• Invest in training the professionals (some estimate 75% never worked under NEC before) – recognise NEC is a culture (early warning / pre-empting etc) as well as a contract (e.g. 7 day period) – lack of knowledge dispute

• Strong / robust / competent Project Management (avoid PM inaction disputes) – c.f. Adjudication – answer the right question – Project Manager failure dispute

• Avoid contract amendments• Avoid “creeping” design into construction period (if contract assumes

design is complete) – potential of multiple Compensation Events (c.f. global claim)

• - Strategic failure dispute

Competence – c.f. “lack of knowledge” disputes

Reference HSE (WWW.HSE.GOV.UK):

To be competent, an organisation or individual must have:Sufficient knowledge of the specific tasks to be undertaken and the risks which the work will entail; and

Sufficient experience and ability to carry out their duties in relation to the project; to recognise their limitations and take appropriate action in order to prevent harm (c.f. damage) to those carrying out construction work, or those affected by the work

Competent designers eliminate hazards and reduce risks – manage the risk, not the paperwork

Overview

• What types of problem did escalate into disputes?

• Many different types of problem but common thread is lack of knowledge (NEC is sophisticated contract – parties go into it with “eyes open”)

• Internal Factors (pre-empt or countermeasure):

• Competence / Competence / Competence• Experience / Education / Training

• External Factors (respond to or anticipate)

• Politics / Environment / Economics / Social / Technical • (i.e. PEST Factors)