Disputes Resolution Boards

Construction Management – a report from the first session of the IBA ICP Committee in Sydney

In October 2017, the International Bar Association held its annual conference in Sydney.  I was tasked, along with Jaime Gray from Navarro Sologuren, Paredes & Gray in Lima, Peru, with chairing the first session of the International Construction Projects Committee, on Construction Management – A Path to a Good Outcome or a Sure Way to Blow the Budget?

The task of the session was to examine the risks and benefits of adopting construction management as a procurement model for major projects.  The panel comprised internationally recognised construction lawyers and advisers Peter Scott Caldwell (from Hong Kong), Eduardo Koch (from Nicholson y Cano, in Argentina), Randy Hafer (from Kilpatrick Townsend in Atlanta, Georgia, USA), Yasemin Cetinel (from Cetinel Law, in Istanbul, Turkey and Rome, Italy) and Bill Barton (from Barton Legal in Leeds, UK).

The consensus of the discussion was that, while direct contracting using a construction management model may have advantages, they are not for the faint hearted.  Managing the various interfaces between the construction manager, the designers, main contractor and specialist suppliers and subcontractors can get messy, and the ability to lay off liability between each project participant is limited.

In order to capture the benefits potentially on offer through construction management, the owner needs to be very disciplined in the core requirements for all successful projects:

  • engaging the right resources at appropriate times;
  • investing time in defining the scope of the project and each appointment before it is made;
  • using risk registers and proactive project management techniques to identify project risks at a time when they can properly be avoided or at least mitigated;
  • properly establishing a reasonable project cost and monitoring progress of costs against budget at a time and in a manner which enables blow-outs to be avoided; and
  • including a disputes avoidance regime which maintains a collaborative relationship throughout the project team.

The conclusion was that any procurement method alone is insufficient to achieve this.

The published report is here.

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Dispute Resolution of Construction Disputes

On Monday, 13 November 2017, AMINZ ran a one day seminar on resolving disputes in the construction industry.

The day was chaired by Derek Firth, and presentations were made by Stuart Robertson, from Kensington Swan in Auckland, on the role of the Engineer; Janine Stewart, from Minster Ellison Rudd Watts in Auckland, on adjudication under the Construction Contracts Act 2002; Michael Weatherall, from Simpson Grierson in Auckland, on the use of disputes boards; and I rounded out the day on the use of arbitration.

The panel discussion discussed each process and issues arising from all perspectives, including acting for owners, acting for contractors and acting as adjudicator/arbitrator, and provided valuable information on the topic.  The papers will be loaded on the AMINZ website shortly.  In the interim, my paper is attached:

Arbitration of Construction Disputes

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Managing Disputes in Major Projects

It is easy to forget that the parties to disputes – those who actually have a vested interest in the outcome, and who pay our bills – are very rarely in the business of dispute resolution.  They have businesses they wish to run, and disputes are generally costly distractions to those businesses.  I would venture to add that the cost, uncertainty and delay in traditional litigation (and sometimes arbitration, for that matter) is unwelcome in a way that commercial advice geared to project delivery is not.

This paper was presented to the Arbitrators’ & Mediators’ Institute of New Zealand annual conference in Auckland on 26 July 2013.

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Risk-avoidance in construction and major procurement contracts

A proper allocation of risk is generally not achieved by simply accepting a standard or doctrinaire approach.

Risks are usually project specific, and therefore need to be identified on a project by project basis. This is most effectively done by developing a risk register, first within the project team, then refining it during the tender process, and maintaining it after award on a collaborative basis with the contractor as work progresses. Skilled, experienced project teams for the employer and contractor working together from the outset of a project are important to this process.

This paper, Risk-Avoidance, Transfer, Acceptance or Management was jointly prepared by John Walton and English construction law specialist, John Bellhouse (of Gray’s Inn).  We previously worked together in Hong Kong on the new airport project.  The paper was presented to the Society of Construction Law international conference in May 2012, for which it was awarded a prize.

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Drafting for Disputes – DRBs, DABs and Project Mediation

The most significant development in ADR internationally is the almost universal acceptance of dispute resolution boards (DRB), whether comprised of one member or three.

The emphasis of DRBs is for the parties to keep the board informed of the progress of the works, and to allow a truly independent party, one step removed from the project, to make decisions using flexible procedures appropriate to the dispute.

There seems to be considerable reluctance in New Zealand and elsewhere to embrace what otherwise appears to be an eminently sensible procedure.  Part of the reluctance is, I suspect, linked to incurring what is perceived as unnecessary cost from adding a further layer of management, and also the perception that a range of skills may be needed which may not be available from a board appointed at award, or after the first dispute arises.

There is also the problem that DRBs sit uncomfortably with adjudication under the Construction Contracts Act 2002.

This paper was prepared for a breakfast meeting for the Arbitrators’ and Mediators’ Institute of New Zealand on 8 May 2007 and as background material for abridged articles for the NZ Lawyer and for Cross Section magazine.

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Unforeseen physical conditions and allocation of risk

In the construction industry, we hear many adages like “project risk should be allocated to the party best able to manage it[1].  While commendable, truisms like this do not do justice to the complexities or the subtleties of allocating risk in large construction projects.

Risk is not static[2].  It changes through the construction process at a number of different levels – likelihood, avoidability, severity, downstream impact, foreseeability, manageability and value spring immediately to mind, and yet traditional tendered lump sum contracting procedures force contractors to commit to certain outcomes at a time of greatest uncertainty in a competitive environment[3].  The common thread in any analysis of allocation of risk is identifying initial uncertainty, how responsibility for that uncertainty is allocated, and what to do if the risk associated with that uncertainty does eventuate.

This paper was delivered at the first of two sessions organised by the Society of Construction Law on 1 May 2007.

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