Why contracts, project boards and dispute avoidance matter in major building projects
03 April 2018
“I hope I never see that again” – the words of a former boss of mine as I took the signed public works contract out of his hand. Famous words. In preparing for a presentation at an Engineers Ireland conference recently, on the subject of project boards and tools and techniques for dispute avoidance, I was reminded of a pre-marriage course we took.
At this contemplative event (and one we needed to attend to pre-qual with our priest) an exceptionally skilled Jesuit tutor said that he had renamed the module we were about to attend, from ‘Conflict Resolution’ to ‘Conflict Management’ and recently to ‘Conflict Avoidance’.
His mill-pond calmness hid an extraordinary understanding of what emotions convert perfectly rational beings into crazy people, and bring them to their edge, and how little it then takes to get them into a seemingly disproportionate fighting humour from the perspective of the other party. It only recently resounded with me in understanding the science of conflict and dispute, which is a subject that should interest all clients greatly.
I doubt the Jesuit ever taught a module to young couples called ‘Pursuing Conflict Victory’, but it is certainly one of the outcomes that our contracts would have us believe is possible. There is a debate required if the contracts we use are partially aleatory in nature and if they can cope with unknown risk, and at the same time expressly require performance. The purpose of this article is to continue the discussion on how the contract is just one part of the relationship management on a major building project between two apparently willing contractual ‘fiancés’.
For the contract to really work, both parties need to be able to access success, and the conditions to get there need to be voluntary. This will undoubtedly involve risk on both sides. Simple so far; and if you are over 18, sober, and have a pen, then what are you waiting for… The objectives of both parties may be different (see diagram, right):
However, when the balance tips because one of the components isn’t maturing the way it was originally intended, then the parties are reminded of the options available to them to rebalance their side. This rebalancing of the project, in theory, should be mutually beneficial to both parties and therefore enthusiastically pursued, but sometimes the question is not asked if the contract is the right tool to rebalance the relationship, or if, in fact, its use irreparably imbalances the system – permanently.
For my colleagues in the public sector, I hear cries of ‘treason’, so I am minded to point out that dispute avoidance must be a goal; and giving cash away to assist a poorly performing contractor is unacceptable. I propose that what every successful contract needs is a ‘dispute avoidance task force’, be it one person, or a few, and it will involve a lot of communication, so choose the force wisely as ‘soft skills’ will be a must.
If it were just two parties involved in the project, then life would be simple (albeit very busy). Unfortunately, the cause of the imbalance in the project may be caused by other forces or members; some of whom may have made an error which leads to the problem. This happens, and conflict of interest may occur.
The project system has also got to deal with external factors, the risk transfer of which is regulated. However, the various forces in the project may fall into two categories of focus; that of contract and technical management and a more settlement and relationship management. It is these two levels that must be considered in the selection of members to your dispute avoidance task force, and the main diagram above shows that it may occur more in senior management levels, but that should not be taken as general – your ideal task force member may come from the lowest ranks.
Trinity College Dublin is embarking on a number of significant projects, and the timing of our business school coincided with the introduction of the new amendments to the public works contract, including the formalisation of the project board, which was prior to that a tool used by many employers without much structure, and under different names and pursuant to various clauses.
It was clear during the establishment of the project board on the business school, and subsequently on several other projects, that their strengths went beyond a dispute resolution tool, and offered a chance to keep their agenda empty by dispute avoidance. Certainly, it was a decision in our organisation that the project board be populated with principals at the senior-most level, which also allowed our governance models to operate in parallel with the project board mandate.
The project board is structured in the contract and guidance note; and it is clearly and simply laid out. The complexities arise when the parties at the table cannot carry the full governance authority of a major public body, and also when the parties needed in the project board to make this authority happen are not construction professionals. The next issue to tackle is if the chair is the standing conciliator. We opted for not, as we believe it would make every project board meeting a quasi-conciliation. Regardless, the project board should have a number of characteristics for efficient and effective running:
• A convenor; somebody ready to pull together the logistics and identify business;
• A first meeting to agree terms and standing orders; noting that only disputed employer’s representative determinations belong in the project board agenda;
• A set of decent terms of reference to include members, substitutes, location, scope of discussions, decision on notes/minutes, chair rotation/selection, guests, observers and experts.
Why bother with a contract?
Yes, this soft stuff is important I hear you say, but all of this is ‘nauseating’ (which was the review of my presentation by a well-known Dublin solicitor). Will it help me when a builder puts in a claim for 10 per cent of the contract sum for a ridiculous item? If it doesn’t help, it may not be too late to sit with your contractor and discover the real source of pain, and perhaps avoid future pain. Real tools include:
• Re-review the contract information to ensure discrepancies in documents are picked up very early, before they enter the contractors supply chain;
• Invest in BIM to align the design with on-site installation activities;
• Assist the contractor where possible with things you can give – a storage area, parking, an office, out of hours access, your relations with others that are useful to them and so on. These may cost proportionally less to you than the value to the contractor;
• Build a trust to understand the real pinch-points in the contractor’s life right now; by knowing these, you can be prepared at least, but assist if possible. Perhaps switching from a cast-in-situ unit to a precast unit of exactly the same performance will help the contractor? Your consultants will need to burn time to review the alternative, which is another issue.
A good colleague high up the government chain recently said that if the contract is not the weapon of choice, then why do we bother with having it [paraphrasing]? It is critical to have a contract, and to refer to it. This will be the basis for your communication, and importantly, the contract provisions and the project board establishment on a very formal level will give both parties the clear understanding that disputes have a place to go while allowing the project to continue.
But the purpose of the contract is a voluntary agreement between two willing parties to do something, and to be certain about what is not permissible. Beyond that, the contract is not intended to build a building, or a road, or a port. That can only succeed using the motivation and skills of teams from both parties, for which good relationships are absolutely essential.
It is definitely not true to say that all of the projects I have been involved in were ‘candyfloss and cuddles’ all day long. However, the maturation of the contract forms show that the dispute avoidance element of our skillsets needs to be honed, thus making the contract very useful. There is no doubt in my mind that this hypothesis will be seriously tested in the upcoming trials of the Sectoral Employment Order (2017). I may yet substitute our standing conciliator for the Jesuit.
Greg Power is the head of capital projects and planning at Trinity College Dublin, a fellow of the Chartered Institute of Building, and a member of the Government Construction Contracts Committee. The former planning and projects officer at NUI Galway, he has led in-house development teams in both universities to deliver major programmes of large capital projects, using a variety of contract forms, and through a number of significant disputes and the receivership of major contractorshttp://www.engineersjournal.ie/2018/04/03/dispute-avoidance-project-boards-contracts-matter/http://www.engineersjournal.ie/wp-content/uploads/2018/04/a-greg2-1024x755.pnghttp://www.engineersjournal.ie/wp-content/uploads/2018/04/a-greg2-300x300.pngCivilBIM,construction,contracts