Current procurement practise in construction, infrastructure and information and communication technology, with competitive tendering based on incomplete designs and specifications introduces an element of tension following award. The owner wishes to preserve the bargain achieved during tender and the contractor needs to control cost and protect its margin.
Disagreement at some level is inevitable.
Under current contracting approaches, much is focused on the final forum for determination. Interim disagreement is largely left to the principals to negotiate. In construction and most infrastructure projects, the Engineer has an interim decision making role, focused largely on maintaining the progress of work on site. As the owner's consultant, that role is hopelessly conflicted.
In the modern project environment, there is a pressing need for proactive dispute management. While considered by many as an unnecessary expense, appointing an independent neutral at project inception to identify, avoid and manage disputes, if necessary, has real potential to promote positive project outcomes.
The project mediation role takes three forms:
- Risk Identification - following award, the project mediator calls a risk meeting, at which the owner, contractor and other third parties with significant roles (consultants, financiers, off-take participants and key subcontractors/suppliers) clarify their respective roles and discuss the risk management plan for the project.
- Disagreement Management - during the course of the project, the project manager attends project control meetings and is copied into progress reports and formal contract communications. Either party, or the project mediator on its own initiative, can then call a risk meeting to discuss any disagreement which has the potential to crystallise into a dispute.
- Forma Mediation - where a formal dispute materialises, then the project mediator conducts a formal mediation process, preferably as a precondition to any disputes process, like adjudication under the Construction Contracts Act 2002 or arbitration under the Arbitration Act 1996.
This project mediator role is generally in substitution for any disputes management by the Engineer or Disputes Board, and could be combined with the independent pre-contractual roles of probity auditor (ensuring a fair procurement process) and/or peer reviewer (reviewing commercial terms and conditions).
It is not envisaged that the project mediator would issue a decision or report, though the project mediator would typically have an evaluative rather than facilitative role, using the knowledge and benefiting from relationships gained during the course of the project.
When compared to the cost, uncertainty and disruption of engaging in the traditional, tiered disputes processes of referral to the Engineer -> Adjudicator -> Mediator -> Arbitrator, the benefit of early identification and avoidance of disputes should speak for itself. Most owners and contractors prefer to focus on competing their projects without the distraction of engaging in legal processes.
Copies of the draft project mediator, probity auditor and peer reviewer protocols and appointment agreements are available on request.
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