How to deliver an infrastructure project successfully

1. Track A1
Doing Deals & Avoiding Squeals; andThe Set UpTo
Dispute Syndrome & HowTo Avoid It

2. DOING DEALS AND
AVOIDING SQUEALS
An Australian Perspective
Laina Chan, Barrister Selborne Chambers,
MelbourneTEC Chambers, Director and Secretary
of Society of Construction Law Australia

3. Introduction
■ Australia is comprised of a
federation of states and territories.
■ The Federal Government budgets
for federal infrastructure projects
on a State andTerritory basis.
■ No guaranteed consistency in the
execution of each infrastructure
project.

4. ATypical Scenario
■ Common grievances:
– Excessive cost of tendering
– Risk allocation – risk pushed
onto consultants.
■ Contractors are in vulnerable
positions with no bargaining
power.
■ This approach does not lead to
successful delivery of a project.

5. Changes to systems and
processes
■ The changes to the PPP guidelines and
the new PPPToolbox are intended to:
1. reduce bid costs
2. streamline transaction and approval
processes;
3. promote consistency across NSW PPP
projects
4. promote information sharing across
NSW Government agencies
5. continuous improvement as the
procurement processes evolve

6. The Sydney Light Rail Project –
A lesson in what not to do
■ A large public transport infrastructure project
■ A cost overrun of over $1 billion with delays of 1 year.
■ Proceedings against the NSW Government for damages for misleading
or deceptive conduct
■ Benefit to cost ratio reduced from 1.4 to less than 1.

7. The Art of Project
Leadership
■ Only 5% of projects above $1
billion were completed within
their original budget and on
schedule.
■ They are the exception, not
the rule.
■ Average cost overrun was 37%
■ Average schedule overrun was
53%.

8. Megaprojects are prone to overruns

9. Root Causes
■ Leadership does must trump the process.
■ Four discrete mindsets
■ Eight practices
– Four relevant to the project setup
phase
– Four relevant to the project delivery
phase
■ Need a clearly defined project scope with
sufficient upfront investment in a detailed
design.

10. Mindsets
1. Lead as a business, not as a
project.
2. Take full ownership of outcomes.
3. Make your contractor successful.
4. Trust your processes, but know
that leadership is required.

11. Practices –
The setup phase
■ The four practices that require ‘artful’
application:
1. Define purpose, identity and
culture.
2. Assemble the right team.
3. Carefully allocate risk and align
incentives.
4. Work hard on relationships with
stakeholders.
■ Need to focus on careful allocation
and alignment of risk incentives.

12. Practices –
The delivery phase
■ The four practices throughout the
delivery phase:
1. Invest in your team,
2. Ensure timely decision making,
3. Adopt forward looking
performance management,
4. Drive desired behaviours
consistently.

13. A Successful Project –
$16.8 billionWestConnex
■ Involves 33 km of upgraded and new
motorways.
■ A successful example of the art of
leadership in the delivery phase.
■ Project running on budget and on
time.
■ Implements the art of project
leadership.

14. Advice fromWestConnex
Project Leader
 Aim to provide owner obligations
ahead of time.
 Use influencing and networks
across agencies.
 Mutual trust and joint problem
solving.
 Work as a business partnership
with a mindset of ‘we win
together’.

15. Advice fromWestConnex
Project Leader
■ Agility is key.
■ Honesty is key.
■ Strong contract
management and
processes are also key.

16. THE SET UPTO DISPUTE
SYNDROME AND
HOWTO AVOID IT
WaliedAbdeldayem
Managing Director - Intellect Dispute Experts Advisory (IDEA)
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17. Claims & Disputes - Overview
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18. Claims in Construction Contracts
■ Construction contracts provides for a specific remedy in the event of
breach and grant entitlement in respect of specified events
■ Remedies are sought by following ‘the claims procedure’
■ The claims may be:
– assertion for financial compensation
– assertion for an extension of the time
– and/or other benefits
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19. Claims in Construction Contracts
■ Proper planning and risk management could help minimize claims
■ Construction Claims are inevitable - practically impossible to:
– foresee every event that might occur during the construction period
– plan in advance for the consequences of such events
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20. Claims vs Disputes
■ Dispute – “any contract question or controversy that must be settled beyond the
jobsite management”
– Diekmann & Girard, 1995
■ Claim – “a request for compensation for damages incurred by any party to a contract”
– Semple, Hartman, & Jergeas, 1994
■ Halki Principle
– A dispute does not exist until a claim has been submitted and rejected; a claim being
a request for compensation for damages incurred by any party to the contract.
Based on the case of Halki Shipping Corporation v Sopex Oils Ltd [1998] 1WLR CA.
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21. DisputesAvoidance & Resolution - A
Conceptual Model
■ The ‘Must-Have’ Organizational Functions:
– Dispute avoidance: focuses on avoiding disputes by managing claims
in efficient and timely manner
– Dispute resolution: when disputes cannot be avoided, the focus is on
systematic and integrated dispute management mechanism to ensure
the disputes are settled as efficient as possible
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22. DisputesAvoidance & Resolution - A
Conceptual Model
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23. Poor Project Mission Definition
■ Most owners, while giving attention to project’s symbolic
aspects, overlooking the quality of specification and
realization
– quality of specification concerns proper final and
coordinated design;
– quality of realization covers a realistic timeframe and
budgets.
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24. 24

25. Claims and Disputes as a Potential
Risk
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26. Owners’Wait & SeeTactic
■ Negative perception of claims - confusing claims for disputes
■ Owners tend to ignore the matter until it is too late
– Leading to less control in addition to losing the opportunity
to have cost efficient and effective resolution
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27. Typical Progress Meeting!
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‘tell them what they want to hear not what they need to
know’ – very damaging, should be avoided

28. Early and late addressing of claims – Risk
Management Perception
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• Construction Claims are:  R I S K S!

29. Claims & Disputes Management against
Project Life-Cycle
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30. Impact of lack pr proper Claims & Disputes
Management on the Project’s Economics
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31. Prisoners Dilemma
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32. Prisoners Dilemma
■ Two suspects got caught for a crime they committed together
– not enough evidence
– at least one has to confess to press charges
■ Suspects were separated and are under interrogation in separate rooms.
– They know they both got caught
■ Suspects Options
– Deny allegations, give no evidence at all
– Snitch, provide evidence against the other suspect
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33. Poll Question
■ If you were Suspect 2, which option would you choose? (Remember, you
never know what Suspect 1 will do!)
– Deny (Choose A)
– Snitch (Choose B)
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34. Suspect 1 Decision
Snitch
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35. The out come of your decision!
Suspect 1 Action
Snitch Deny
Suspect2Action
SnitchDeny
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36. The out come of your decision!
Suspect 1 Action
Snitch Deny
Suspect2Action
SnitchDeny
Both walk away
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37. The out come of your decision!
Suspect 1 Action
Snitch Deny
Suspect2Action
Snitch
Each gets sentenced for 2 years
Deny
Both walk away
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38. The out come of your decision!
Suspect 1 Action
Snitch Deny
Suspect2Action
Snitch
Each gets sentenced for 2 years
Suspect 1 gets 5 years;
Suspect 2 walks away
Deny
Both walk away
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39. The out come of your decision!
Suspect 1 Action
Snitch Deny
Suspect2Action
Snitch
Each gets sentenced for 2 years
Suspect 1 gets 5 years;
Suspect 2 walks away
Deny
Suspect 1 walks away;
Suspect 2 gets 5 years.
Both walk away
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40. The Most Logical Choice
Suspect 1 Action
Snitch Deny
Suspect2Action
Snitch
Each gets sentenced for 2 years
Deny
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41. ■ Consider others’ plays when deciding on your own move
■ Under pressure, a decision maker may willingly take a harming
decision to avoid a potentially more harming situation
■ Construction contracts are generally set for going down a spiral
road of disputes unless:
– Trust is built, proper communication channels are opened, and
(intentional & unintentional) signaling is properly interpreted
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The Most Logical Choice

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43. The Dispute Syndrome
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44. The Dispute Syndrome
■ The Client-Agent Problem principle plays a vital role
escalating claims into disputes
■ The Client-Agent Problem is manifested by the fact that each
party has different interest which are often conflicting
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45. The Dispute Syndrome
■ The more an organization can align its goals with others’
goals, the less such problem is likely to have a noticeable
impact on the organization’s performance
■ In practice, owners and the contractors tend to participate in
a destructive syndrome that eventually leads to disputes
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46. 46
Contractor takes
aggressive and
adverse position
Triggering Event
Process of claims
started and
became known to
Owner
Lack of strategic
forward thinking
reflected on
claims
submissions and
Triggering
Event
Lack of trust –
negative
perception of
claims
Owner lacks
objectivity and
unreasonably
dismisses
claims
Owner takes
aggressive and
adverse
position
Contractors’ Syndrome
Owners’ Syndrome
Deadlock – Issues escalated into disputes

47. Example of aTriggering Event
■ Overriding & manipulating schedules to show what the
scheduler/planner wants it to say
– “I’m a great contractor’s scheduler and I made all owners’ activities
shown as critical”
– “I’m a great owner’s rep and I forced the contractor to remove owner’s
activities from the critical path”
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48. The Pitfalls!
■ Losing the opportunity to use schedules to add value to the
project and enhance project delivery
■ Losing trust and ruin relationships
■ Triggering a spiral road towards conflicts & disputes,
sometime over unnecessary issues that may not be relevant
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49. Avoiding the syndrome
■ A claim in construction is a contractually agreed upon
mechanism to assert and entitlement, not a declaration of
war, at least not at the start!
■ Negative perception of claims and lack of objectivity are the
main reasons to escalate claims to disputes
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50. Avoiding the syndrome
■ Project owners should develop claims and dispute management capabilities
■ Contractor should remain objective in assessing their likely entitlements
■ Consider collaborative planning to meet target programmes and increase
production
– Collaborative working has to be supported by suitable contractual rights and
obligations
– Otherwise, it is a recipe for disputes
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51. 51
Avoiding the syndrome – Snitch!

52. At the end – what to take away?
■ Expect and manage claims to avoid (or minimise) escalating issues to disputes
■ Maintain the project schedule (and keep them neutral) to better inform the decision
making process
■ Work to establish trust and communicate effectively, be mindful of the importance of
intentional and unintentional communication signalling
■ Avoid potential triggering events that may cause the spiral dispute syndrome
■ Understand the allocation of risks – work collaboratively but do not assume others’
risks or compromise your contractual position
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