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The future for dispute resolution in construction and engineering
- Mar 17, 2020
- Latest Journal
In the future there will be fewer disputes in the construction industry. There will be greater co-operation between employers and suppliers, who will work together to ensure conflict is avoided where possible. When differences do arise,employers and suppliers will routinely adopt procedures that resolve matters early, quickly, cheaply and amicably, thus ensuring projects are delivered on time and on budget.
For anyone who has been involved in the construction sector for any length of time, the above declaration may appear to be a tad optimistic. Some may even say an industry that is geared to avoid disputes completely, or even deal with emerging issues promptly and cordially, is improbable. The industry has a long reputation for being rife with disputes. Relationships between employers and the supply chain have historically endured a prevailing mindset of contention that has seemingly made disputes inevitable. So much so that many employers and suppliers effectively include the costs of resolving disputes as part of their budgeting programmes, typically under a category such as “legal” or “contingency”.
When I first started working for RICS in the early nineties, the use of alternative dispute resolution was a relatively new concept in the UK construction sector. In those days formal dispute resolution consisted mainly of lengthy, complicated and costly litigation or lengthy, complicated and costly arbitration.
There were certainties one could rely on when taking a construction dispute to court or arbitration. No one, except perhaps the judge or arbitrator, could understand what was going on. Lawyers and surveyors acting for the parties involved in the dispute would often talk at length without coming to an agreement as to what the issues were. Decisions on disputes were a long time coming. Party representatives who were young when they were first engaged in the dispute were often significantly older when it was eventually resolved. I know of some who even had time to die before the end of it.
In the course of litigation or arbitration, many surveyors and other professionals would find themselves appointed at various stages in long drawn out disputes without knowing how or why matters had got so far. Newly qualified surveyors would join a firm only to become embroiled in a long running dispute, and thus inherit their new firm’s perpetual dislike of another firm which acted for the other party. Several governments and incumbent Prime Ministers could have come and gone while the process for resolving the dispute dragged on. In the end, the parties and their professional advisers, at least those who had made it that far, had often forgotten what the dispute had been about in the first place. Both parties will most likely have wondered why their bill outweighed the amount that had been in dispute by several fold, and how they were going to pay it.
The most recent attempt to address the myriad of problems caused by the normality of constant disputes across the UK construction industry was over 20 years ago. This was the introduction of the statutory right to adjudication in 1998, since when thousands of disputes of varying complexity and value have been decided by independent adjudicators.
That nearly 2000 adjudications are happening each year in the UK can be seen as testament to its success. Adjudication has enabled the industry to deal with an abundance of disputes that continue to persist, by using a timetable and procedure that is designed to be quick, focussed and cost-effective. But it is apparent that poor payment practices, and a deep-seated adversarial and claims-conscious attitude continue to prevail, and that adjudication has done little, if anything, to bring about a culture change that will improve employer/supplier relationships and thus reduce the numbers of disputes that occur in the industry.
There is little doubt that a construction industry where there were fewer disputes would be welcomed by employers and suppliers. One may also presume that decision-makers from the both the employer and supplier sides genuinely want to avoid disputes, and that they would be prepared to proactively ensure that the mechanics for conflict avoidance are in place, and, when disputes arise,adopt systems to resolve them quickly, cheaply and amicably.
In the pursuit of a better future for dispute resolution in the construction industry, a coalition of professional organisations and industry bodies has currently embarked on a tremendous campaign of innovation and co-operation. The Conflict Avoidance Coalition was set up by RICS and ICE in 2014. It has since expanded and now includes the RIBA, CIArb, DRBF, ICES, ICC (UK), Network Rail and Transport for London.
The purpose and vision of the coalitionis to support the development of a culture of collaboration, and reduce the numbers of disputes and the damage they cause to commercial and personal relationships, finances, project delivery and brand reputations.
The coalition’s strategy is to inform people working across the industry, at every level, about how conflict avoidance and early intervention techniques prevent and resolve disputes, and thus support the delivery of infrastructure and property development projects.
Network Rail (NR) has made an immense contribution to the coalition’s aims by demonstrating a real commitment to improving its relationships with suppliers and reducing numbers of disputes. NR is leading the way in developing working practices and a culture that encourages contracting parties to adopt a forward-looking approach to risk management, which avoids confrontation, saves money and ensures projects are delivered on time and on budget.
The DAP programme, as it is called, has been helping NR and suppliers to identify potential problems, and deal with them, before they ever arise. DAP involves setting up an early warning system that explores potential risks connected to a project. It often includes the use of contractual procedures which are designed to mitigate against problems arising and settle differences before they crystallise into formal disputes.
DAP is normally introduced early on, even before a contract is signed. If required, it can continue through the lifetime of a project, e.g. were parties desire a neutral insight into how identified risks are performing over time. Its primary aim is to detect potential problem issues and ensure there is a coherent understanding of the risks across the relevant project teams.
DAP evidences NR’s commitment to breaking the cycle of constant disputes through greater co-operation between employers and suppliers, who actively work together to avoid conflicts arising in the future. The implementation of DAP by NR has demonstrated that it is a viable dispute avoidance system that recognises the value of open and honest communications between parties on how to deal with potential risks. A justification is that parties who regularly connect with each other freely and openly are more informed and able to tackle problems collaboratively, without fear of negative consequences.
Transport for London (TfL) has also demonstrated a sincere willingness and ability to take a lead in reducing the number of disputes with suppliers that end up in formal dispute resolution procedures. TfL has worked with RICS to develop a highly effective methodology for identifying emerging disputes early and dealing with them quickly, cheaply and amicably. The process is called “CAP”. and to date, it has been exceptionally effective at preventing disagreements from becoming full-blown disputes that require lots of legal spend, and would place TfL and suppliers into long-standing positions of confrontation.
A key benefit of CAP has been its ability to safeguard against commercial managers and directors,for both TfL and suppliers, losing the capacity to choose how their differences will be resolved, as would happen if they were moved into the hands of lawyers.
Generally, CAP involves an impartial review of an issue, or issues, on which parties do not agree. The review is undertaken by an independent person who is a highly credible and experienced subject matter expert. He or she usually engages with all relevant parties, undertakes an investigative role and provides substantive, fully reasoned, recommendations for settlement.
CAP is a flexible dispute avoidance method. For example, parties can opt for CAP to yield binding or non-binding recommendations. Where they are non-binding, recommendations can be used to inform discussions between the parties and stimulate settlement. In addition, parties can choose a CAP procedure where, if either party declines to accept a non-binding recommendation through CAP, they will be required to provide written reasons. This can dissuade a party from unilaterally declining a recommendation simply because they do not like it.
The Conflict Avoidance Coalition has also created close links with the industry-wide change programme known as Project 13. This government backed initiative has been established by the ICE and Infrastructure Client Group (ICG) as a vehicle to improve the way UK infrastructure is delivered and managed. The rationale for the coalition to be engaged with Project 13 is that effective dispute avoidance and early intervention procedures are key components of efficient project management.
The Coalition has prepared a conflict avoidance pledge which, inter alia, commits organisations to adopt conflict avoidance into their projects. To date, over 130 organisations have signed the pledge.
A toolkit has also been prepared which provides information about a wide range of things people can do to avoid, manage and resolve disputes, and prevent small problems from escalating into big ones. https://www.rics.org/globalassets/rics-website/media/upholding-professional-standards/regulation/drs/conflict-avoidance-toolkit.pdf
The establishment of the pan-industry Conflict Avoidance Coalition, and the successful adoption of dispute avoidance and management procedures by NR and TfL are evidence of the profound changes that are happening in the construction industry, and that they are happening at an unprecedented pace. The Coalition is now helping a number of other leading industry bodies to apply conflict avoidance and early intervention procedures.
The adoption of innovative and highly effective methods for avoiding and managing conflicts by 2 of the UK’s major employers, the appetite to apply similar methods that is being shown by other organisations and the commitment of 7 leading professional/membership bodies to help them, signals that the future of dispute resolution is exciting and will lead to a better, more efficient, more attractive construction industry.
RICS, Head of ADR Research and Development
10 January 2020