Construction Disputes: Seeking Sensible Solutions

construction disputes

Construction Disputes

Seeking Sensible Solutions

Wayne Clark

London Publishing Partnership

Copyright © 2021 by Wayne Clark

Published by London Publishing Partnership

www.londonpublishingpartnership.co.uk

All rights reserved

ISBN: 978-1-913019-48-8 (hbk)

ISBN: 978-1-913019-49-5 (ePDF)

ISBN: 978-1-913019-50-1 (ePUB)

A catalogue record for this book is available

from the ­British Library

Typeset in Adobe Garamond Pro by

T&T Productions Ltd, London

www.tandtproductions.com

Contents

A Tribute to Stephen Hepburn

Foreword by Husam Gawish

Preface

Acknowledgements

Managing Construction Projects to Prevent Disputes

Wise Contract and Claim Management

Construction Claims: The Investigation

The Covid-19 Pandemic

Preparing Claims to Persuade a Tribunal

Seeking That Sensible Solution: Negotiation

When Negotiations Fail: Alternative Dispute Resolution

When All Attempts to Settle Fail: Arbitration

Conclusion: Seeking Sensible Solutions

Further Reading

About the Author

A Tribute to Stephen Hepburn

My book is dedicated to Stephen Hepburn, who I met in Interlaken, Switzerland, in July 2020. At this, our first – and, as it turned out, only – meeting, we enjoyed lunch and a few glasses of wine. During the rather long lunch, Stephen encouraged me to write a book on construction contracts and claims. He encouraged me to write this book.

We kept in touch regularly after our Interlaken lunch, chatting on the phone, exchanging emails and messages, strategizing over my developing book.

Sadly, Stephen passed away suddenly on 8 January 2021. I miss him very much.

Rest in peace my friend.

Foreword by Husam Gawish

There are very few active professionals in the construction industry who are as experienced or as well equipped in the area of construction claims and dispute resolution as Wayne Clark. Readers of this unique book have the opportunity to benefit from Wayne’s considerable experience in the field – experience that has primarily focused on dispute avoidance and finding sensible solutions , a theme that runs right through his excellent book. Wayne has managed to skillfully draw on his fifty years of practical, hands-on involvement with claims management and dispute resolution to deliver this considerable and important contribution to the industry he loves and has been a part of for so long. This simple and easy-to-follow guide is a truly valuable resource to help you find a ‘sensible solution’ to construction disputes.

Disputes in construction are nothing new, and nor will they ever go away. They are inevitable. They occur for a multitude of reasons that are not always obvious and cannot be foreseen. Disputes differ in nature depending on contracts, region, culture and legal jurisdiction. Common causes of construction disputes include changes in scope, contract interpretation issues, contract administration failures, incomplete or incorrect design information and site access restrictions. By no means are the causes limited to these examples, either: the list is long and extensive.

Disputes also arise when projects are awarded on the basis of price and not quality. Contractors find themselves engaged in pricing wars. Not only is the budget underestimated but often the execution programme is unachievable. The project is doomed to failure before it even begins. The can is simply kicked down the road, paving the way for inevitable future claims and disputes. Other factors also come into play, such as the effectiveness and independence of the engineer, the willingness of the employer to be reasonable, the experience and quality of the contractor and, more importantly, the environment in which the contracting parties are operating. Is everyone singing from the same hymn sheet? Is there a common-sense approach of togetherness and a genuine will by the parties to cooperate and collaborate in order to achieve a common goal?

Construction contracts – in all their numerous forms and types, whether standard or bespoke – are intended to administer and manage the execution of a project. The contract aims to ensure that the project works are delivered in accordance with the agreed scope, within budget and within the agreed timeframe. This sounds simple in theory, but in reality it is seldom a straightforward process. No matter how well written a contract is, it simply cannot cater for every situation or eventuality. More often than not, projects encounter events and issues that ultimately lead to delay, disruption and additional costs. The impact on the successful delivery of the project will vary depending on the nature of the events. Disputes naturally arise when the parties disagree and argue about where the blame and responsibility for those events lie. Construction contracts require the parties to give timely notices of events and claims. Contracts also provide a procedure for the evaluation and assessment of these claims and for awarding additional time and/or costs if entitlement can be demonstrated. If it is not possible for the parties to reach agreement, the contract will also provide dispute-resolution mechanisms that allow the parties to engage in formal proceedings, whether these are in the form of litigation, arbitration or any other alternative dispute-resolution procedure (e.g. mediation, expert determination or dispute boards).

Disputes can run for extended periods of time, reaching several years in many cases. More importantly, they cost a significant amount of money, and the damage inflicted on relationships is often irreparable. This is precisely why Wayne’s book is an invaluable guide – one that offers sensible solutions to the construction industry. The book provides a clear step-by-step guide to all parties on

best practice in managing projects;

how to avoid disputes in the first place;

drafting strong, credible and persuasive claims;

the art and skill of negotiation; and

the ideal process for managing the resolution of disputes.

Having had the privilege of working closely with Wayne for more than four years and having known him for longer, I have first-hand knowledge of his extraordinary ability to distil the facts and focus on the crux of the salient issues. Wayne’s fifty years of experience in the construction industry, working for both contractors and consultants in different parts of the world, is brought to the fore in this must-read book. Wayne’s focus on avoiding unnecessary conflict, and on finding that sensible solution, is central to the advice and guidance he gives throughout his book. As he notes in his preface, he tries ‘to focus on ways to avoid disputes, or to manage the disputes when they cannot be avoided’. Wayne has certainly achieved that goal.

The book also looks at the dilemmas faced by parties as a result of the Covid-19 pandemic, and Wayne includes recommendations for achieving a fair and sensible outcome. He also looks briefly at third-party funding and how this can encourage the parties to settle. An unexpected inclusion in the book is the introduction of the ‘shadow arbitrator’, who, if commissioned early in the dispute process, can guide parties and legal counsel to prepare claims and arbitral pleadings that will persuade a tribunal – and encourage the parties to find that sensible solution.

Wayne’s book will be of particular interest to young construction professionals who are in the early stages of their careers. It will help them avoid the pitfalls of poor project management. It will inspire them to strengthen relationships and avoid disputes, and it will guide them on how best to manage disputes if all else fails. More seasoned construction practitioners will no doubt find Wayne’s book a valuable reminder and reference that they can fall back on when the wheels of their projects start becoming loose.

Thankfully, Wayne remains very much active in construction and will no doubt have much more to offer to construction professionals of all ages and from all corners of the globe in the years to come.

Preface

Disputes are not uncommon in the construction world. In my experience, construction disputes more often than not arise because of the human factor – because of people. Initial differences of opinion become disputes, and these can develop into serious conflict. Once an impasse is reached – when it seems impossible for the parties to agree on anything – the disputing parties often believe the only path left for final resolution is arbitration or litigation.

Fortunately, most people are sensible and usually find solutions to their differences. Solutions that avoid time-consuming and costly arbitration or litigation. Solutions that can prevent irreparable damage to relationships.

Disputes can be avoided at an early stage, when issues and problems first surface – issues that are affecting, or may go on to affect, the efficient performance of a project. How these situations are managed will determine whether or not the differences can be overcome and serious conflict avoided.

In this book I try to focus on ways to avoid disputes, or how to manage the disputes when they cannot be avoided. I deal with the art of developing credible construction claims – claims that will encourage, even persuade, the parties to engage in constructive dialogue and find that sensible solution. My book also briefly looks at the process of resolving disputes when negotiations fail, at resolving disputes through third-party resolution such as mediation, and ­dispute adjudication boards. And for those occasions when third-party resolution fails, I discuss the final stage for resolution: arbitration, which is the final option available in most construction contracts. Very few of the projects I have been involved in have ended up in the courts. The vast majority are referred to arbitration for final resolution. It is for this reason that the focus in my book is on arbitration for final resolution of construction disputes.

While I explore various ways to manage and resolve disputes in the book, a large part of it deals with the management and preparation of credible claims – claims that will persuade an arbitral tribunal. If the claim is good enough to persuade a tribunal, a wise recipient should recognize this and be persuaded to seek and find a sensible solution.

Later in the book I discuss the role of the shadow arbitrator. Shadow arbitrators can help parties and legal counsel prepare claims and arbitration pleadings that will persuade a tribunal and that should also persuade the other party to settle. I also briefly look into third-party funding and how this might also encourage parties to settle.

With regard to preparing claims, I have assumed – in fact, I highly recommend – that the preparation of contractors’ claims is undertaken by an independent consultant who is an expert in dispute and claims management – someone with hands-on experience in settlement negotiations and who understands the dispute-­resolution process. Ideally, one wants to find someone who has experience in arbitration or is a practising arbitrator – someone who can think like an arbitrator.

The reason I encourage contractors to engage an independent ­consultant/expert is for their objectivity. While contractors’ in-house personnel might be perfectly capable of preparing claims, personalities, emotions and ownership of the issues all get in the way. Weaknesses may not be viewed objectively – or worse, they might be overlooked or ignored.

In-house personnel often focus on what they perceive to be undisputed entitlement – their perceived rights – whether or not they have the evidence to support such perceptions. Weaknesses that are overlooked or ignored are weaknesses that will certainly be exploited by the other side. Unless they are recognized and addressed, such weaknesses will turn out to be the other side’s strengths.

In line with my views on why in-house personnel should not draft their own claims, this book is written on the premise that contractors’ claims will be undertaken by a team of independent construction consultants, all experienced and/or experts in their own particular fields. When developing the claims, the team will work closely with the contractor, their client, to agree on the structure and content of the claim and to agree a strategy for reaching an early and amicable settlement. That is, they will look for a strategy for success.

Throughout the book I refer to the contractor (who could equally be a subcontractor) as the ‘contractor’, ‘the client’, ‘our client’ or ‘my client’. The independent consultant is me, and my support team is referred to as ‘our claims team’, ‘my team’