Legal

Legal: Blowing the whistle on construction disputes

11 January 2010

Legal advisers suggest a range of tactics contractors can deploy to avoid or defuse disputes

Many CM readers will probably have experienced the horrors of a construction dispute – if not first-hand, they’re sure to know someone who has. But for a contractor starting the New Year with a resolution to avoid or win any disputes that do arise in 2010, there are steps they can take to put themselves in the best possible position.

It’s important to be able to show that you did your work as set out in the contract. Of course, time for administration is limited in the real world.

But the other side may well back down from a dispute if they know you have the necessary documentary evidence to tip the evidential scales in your favour.

The key to successful contract management is to understand the requirements of the contract and ensure that the company fulfils its formal obligations under it. To that end, project directors could prepare a contract management manual to assist staff to explain how the contract operates, including the mechanisms and dates for payments and notices. It should also ensure that contract notices and other communications, such as invoices, are consistent and supported by appropriate back-up documentation and purchase order/job numbers. Above all, the manual needs to be straightforward and easy to read – people can be intimidated by detail.

With large, high-value contracts, it is wise to implement a procedure for monitoring progress on a contract, and vetting the submission of any claims that arise. The vetting could be carried out by a committee of senior personnel who could test the substance and reliability of claims and ensure they are not overstated.

The committee could meet regularly, so that everyone knows where they stand on practical and contractual issues.

It is important that the panel is made up of individuals who have a working knowledge of the contract. For example, the views of the clerk of works would be invaluable, as would those of the executive director who is intimate with the details of the project.

By doing this, you are lessening the prospect of a dispute by thinking matters through, and testing your claim in-house before submitting it to the other side.

If you consider a response to your claim to be unsatisfactory, then a pre-issue meeting with the other side might help to find common ground. Face-to-face meetings promote good communications, the absence of which is often a significant factor when a conflict degenerates into a full blown dispute.

There’s always a risk that a pre-issue meeting can become a slanging match.

It is a good idea, therefore, to request and agree with the other side on the appointment of an independent chairman to aid the discussion and assist the parties in reaching an agreement to the issues in dispute.

In a large project with a fixed end date, it’s worth considering an Independent Dispute Avoidance Panel, similar to that established by the Olympic Delivery Authority to help ensure that the London 2012 project is completed on time and to budget. The panel, made up of construction industry experts, is on hand to help contractors talk through potential problems before they become disputes.

It will get involved long before traditional dispute resolution processes start.

At the Olympic Park, the panel meets regularly and has held dispute avoidance workshops with the main contractors.

As yet there have apparently not been any issues requiring its involvement. Its experience is evidence that alternative thinking and a pro-active approach can help contractors avoid disputes in 2010. 

By Peter McHugh, a partner and specialist construction lawyer at Midlands law firm Challinors, and Andrew Maguire, a barrister at St Philips Chambers in Birmingham

Five ways to…

…make constructionline work for you

01 Deal with duplication 

More than 2,000 private and public sector organisations use constructionline, which is a register of 18,000 pre-qualified suppliers. Some suppliers have been asked to complete identical pre-qualification questionnaires by different buyers. If this happens, call our new anti-duplication hotline on 0844 892 0316, and we can then contact the buyer to resolve the issue.

02 Keep your information up to date

Suppliers that want to be considered for tenders, or to be added to a buyer’s preferred supplier list, need to keep their information up to date. Ensure your references and full scope of work categories are as current as possible. A supplier with out-of-date data will stick out to potential clients who, in the wake of record industry insolvency levels and tightening budgets, are more cautious than ever.

03 Don’t just join and sit back

Becoming a registered supplier is only the first step to winning work. Search the database for registered buyers in your area or that might need your services. contact them and make sure they are aware you are now pre-qualified on constructionline by passing on your registration number.

04 Manage your own subcontractors

Contractors that need to hire a subcontractor can also use constructionline as a buyer for free. This way you can offer your clients the reassurance of having a fully audited and transparent supply chain, while also speeding up your own procurement processes.

05 Demonstrate corporate social responsibility

Show as much information as you can within the confines of the prequalification questionnaire and be prepared to provide more information through the tender process. make the most of the references and appendix sections to talk about any relevant experience you may have, particularly certificates like ISO 14001 or OHSAS 18001. It’s also important to demonstrate that you can deliver on the cSR policies you mention – by citing your company’s site accident safety record, for example.

 

Philip Prince, sales and marketing director, Constructionline

Comments

I do share your enthusiasm with regard to Dispute Avoidance Panels within commercially large projects, one such form is the Dispute Adjudication Boards (DABs). In a place like the UK where DABs are backed by Parliament under the Housing Grants, Construction & Regeneration Act of 96, the finality of DABs’ decisions is enforceable (unless either party shows dissatisfaction and decides to pursue other forms of ADR or go for litigation). As for the developing world, the enforceability of DABs decisions is questionable since there are no civil codes to back it up, in many cases. And so parties to a large construction dispute, commercial in particular, do lean on a good old arbitration clause rather than any form of avoidance panels, which is unfortunate.

Hani El-Falahi

Hani El-Falahi, 6 March 2010

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