Dispute avoidance and dispute management in construction and engineering contracts

1. CONSTRUCTION
& ENGINEERING
SEMINAR
JASON SMIT

2. > “The Employer, the Contractor, the Project Manager and
the Supervisor shall act as stated in this contract and in a
spirit of mutual trust and co-operation”
> NEC 3 Engineering and Construction Contract 2005
> Or: the parties will prepare a contract, ignore its provisions
entirely and read it for the first time when a dispute arises
> Many of the disputes which arise in these under these
contracts are potentially avoidable if certain safeguards are
put in place
> Effective use of the dispute provisions can also potentially
avoid protracted and costly litigation
2
DISPUTE AVOIDANCE AND DISPUTE
MANAGEMENT IN CONSTRUCTION AND
ENGINEERING CONTRACTS

3. > Common objective: finish the project on time and within
budget
> Is this ever attainable?
> What steps can be put into place to try and achieve this
> Use the contract provisions whenever applicable
> Each party, ideally, should appoint a key person
responsible for supervision of the project
> Judicious use of the provisions of the contract has the
effect of avoiding disputes, not promoting them
3
DISPUTE AVOIDANCE AND DISPUTE
MANAGEMENT IN CONSTRUCTION
AND ENGINEERING CONTRACTS

4. > Creation and maintenance of a programme
> Adjudication of Contractor’s claims
> Life, death, taxes and time-barring
> Understanding of site conditions
> What assumptions are built into the contract?
> Are both parties aware of them?
» Weather
» Geological conditions
» Free issue materials
> Sub-contractors
4
SOME COMMON ISSUES

5. > Early warning notifications, site meetings, monthly
reporting
> The role of outside professionals as part of an advisory
team
> Use of Standing Dispute Adjudication Boards
> Introduction of Step-In Rights into contracts
> The role of the Engineer / Employer’s Representative /
Principal Agent as the Employer’s agent
5
SOME COMMON ISSUES

6. > The Employer’s position is carefully governed by, amongst
others, clause 2
> Employers are not automatically entitled to claim against
Contractors
> Design and execution of the Works, Contractor’s claims and
Rate of Progress notifications must comply with Clause 8
> Notices to correct and termination under Clause 15
> Claims, disputes and Arbitration under Clause 20
> 28 day time period under clause 20.1
> Dispute Adjudication Boards
> Arbitration
6
ISSUES ARISING FROM FIDIC
CONTRACTS – “YELLOW BOOK” AS
EXAMPLE

7. > Early Warning
> Compensation Events
> Changes to the Works Information
> Events stopping completion of the Works
> 8 week time period by default
> Contractor may be obliged to put an instruction (which is a
compensation event) into effect before agreement is reached
on the cost consequences
> Submitted compensation events may be deemed to be
accepted
7
NEC3 – ENGINEERING AND
CONSTRUCTION CONTRACT

8. > Contractor’s obligation to
> “commence the Works with due skill, diligence, regularity
and expedition within the period stated in the schedule
> “Bring the Works to practical completion on the date for
practical completion as stated in the schedule or any
revision thereof”
> Penalties and Practical Completion
8
JBCC 2000 PRINCIPAL BUILDING
AGREEMENT

9. > “The Dispute Resolution Provisions are often
overlooked, both at the tender stage and after the
contract has been awarded. In the very early stages of
a project, the parties will invariably wish to
demonstrate a positive and constructive approach to
the project ….. insufficient attention and consideration
is sometimes given to the adequacy and completeness
of the DRPs, with the parties proceeding in the hope
that they will not have to be invoked”
> Ellis Baker et al: FIDIC Contracts, Law and Practice
(page 505)
9
IN CONCLUSION

10. THANK
YOU
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