Building, Engineering & Construction Disputes Can Be Resolved Without Court Action
Disputes on critical projects, both small and large plague the United Kingdom, a blight upon building projects everywhere. They are complex and long-term by their very nature and are fully able to cripple building projects, sometimes terminally. There are many unpredictable factors which have a severely negative influence on projects including working conditions, logistics, human temperament, Mother Nature, machinery, finances and so on.
A recent report by The Build Asset consultancy EC Harris highlights the growth of these typesof dispute, drawn from their heavy involvment with barristers and infrastructure professionals. It is estimated that the overall value of these disputes increased by 41% across the 2010-2011 period to £6,500,000. The average time till resolution increased from 6.7 months to 8.7 months. This is of course at huge expense to all parties involved in disputes.
Construction Dispute Resolution
I get to see the result of these disputes first hand, being a specialist in Mediation and Arbitration for construction & engineering disputes.
One thing is for sure, this is very bad news for the UK’s construction and project engineering industries. Often, parties involved in these burgeoning disputes jump in with both feet, sometimes contentiously, causing deeper rifts in their relationships with the opposing parties as they do.
Preparation is key. Knowing the primary causes of these problems is vitally important, as well as finding a successful resolution without deepening the rift. The quickest, easiest and most satisfactory process is a simple personal one-to-one negotiation. And this is ultimately how most disputes find their conclusion.
If personal negotiations fail and an early solution is unachieveable, parties will escalate actions. This is the stage at which you will be discussing independent professionals such as mediators and arbitrators who are specialists in dispute resolution.
Fortunately, bringing in third party services can be quick to implement and are usually offered at fixed prices – often much lower than court costs. These methods are private away outside of the courts. However, if this fails, the next course of action is litigation. This may be the best path to follow and in some situations is a necessary step to find a resolution. However litigation is time consuming, lengthy in nature, and is both public and expensive – and don’t forget that the decision by the judge may go your opponents way!
Primary Causes of Construction Disputes
Poor project management
In all construction projects, multiple tasks are required to co-ordinate between different groups of people. Projects both big and small have the same issues, it is just a matter of scale and overall complexity. This includes having numerous contractors collaborating on the same project, including for design, electrical, building or for materials and supplies.
Basic communication and planning errors usually caused by ineffective management will often set a project back by weeks or months, which of course will cost a great deal of money. When this happens, the work is delayed, the client is upset, and before you know it all sides are reaching for the phone to contact the nearest barrister!
Most construction contracts have long timescales, months or even years, and the projects they oversee contain a great number of operations to complete. The result of this, inevitably, is that projects run into uncertainties and complex issues that would have been difficult to predict beforehand.
Unforeseen situations are often not addressed in the contract during the planning stage so, when they arise later, problems ensue as there is no pre-defined path or process to deal with them.
Sometimes, even large contracts come to a head because they are planned and implemented without detailed terms and conditions. A number of building or engineering contractors will have their own personalised terms or perhaps a bespoke contract will be put in place. In the end though, the contract effectiveness will depend on how well their terms have managed to cover all possible eventualities. In many cases using a standard form contract which is professionally adapted to your circumstances is best, as they are generally quite comprehensive and able to cover any circumstances that are likely to arise.
Just like everybody else, business owners enjoy the prospect of an easy life, and they will work assiduously to avoid or prevent construction disputes, yet as soon as ambiguities or uncertainties start leading to financial losses, reduced cash flow and extra expenditure, thoughts of reconciliation tend to blow away with the wind.
Contractor and subcontractor goals
When working on a building project, you will quickly notice that contractors working on site will have different goals and commitments to those contractors that are working on the supply side. While each and every contractor and subcontractor works at his or her own pace, although hard to gauge ahead of time, compatibility is key. Where goal disparity rules, construction disputes will follow.
In these circumstances a whole range of reasons lead to protracted construction disputes like delays, conditions on site, access, design errors, poorly scrutinized tenders and more.
The running of contracts is dependent on people, and the United Kingdom is a welcome home to many people from countries worldwide. Construction projects often are packed with skilled artisans who have traveled from Eastern and Central Europe.
Having such varied cultures working within crucial departments such as designing, purchasing, managing, planning, constructing etc. leads to communication problems and even clashes. These in turn can work to the handicapping of any project as they may lead unwanted to misunderstandings and delays.
It is every company’s responsibility to avoid or resolve disagreements in an impersonal and professional way whatever the reasons may be.
Methods To Resolving Engineering & Construction Disputes
Building projects can have serious consequences, so before embarking on one it is advisable for you to be aware of the legal consequences of such a journey. In the past individuals and smaller companies have used the advice and services of solicitors. This is, of course, a well established method of sorting out such problems, however it can drag you onto an unknown course of ever spiraling costs.
How much do you think your claim is worth?
If it is worth less than £10,000 then you must balance the cost of action vs the value of the claim. Another alternative approach, which offers you financial control is to engage the services of a barrister. This is suitable for most types of business cases, particularly with construction disputes.
This is called Direct Access and comes with a number of distinct advantages. In order to avoid your costs unwittingly escalating beyond what you would want to pay, barristers generally agree to work on a pre-arranged fixed fee basis. This is a welcome relief and removes the anguish of not knowing what your costs are.
Further, acting on your behalf, barristers are able to advise you or write letters. If earlier steps are unsuccessful in resolving your dispute and litigation is required, the same barrister will be the one who represents you in the courtroom.
When using the traditional approach where you have engaged a solicitor, that solicitor will very often have to refer elements of the case on to a specialist barrister in order to receive the correct authoritative advice. Whenever this occurs you are responsible for the costs of both barrister and solicitor. Fortunately, the Direct Access system that allows you to bypass the solicitors services avoids this, significantly reducing your costs.
Appointing And Using A Contract Administrator
Where there are problems relating with interim payments for work done or minor disputes occur on site, using a contract administrator to help resolve things is often the first step to take. An appointed Contract administrator is often a surveyor or an architect. This is normally a friendly low level approach and any decision made by the Contract Administrator can be altered by the courts at a subsequent date.
When To Call In An Independent Expert
Sometimes the dispute is over an issue which is technical in nature. This is best resolved through jointly appointing an expert who will then impartially make his decision about the issue.
Negotiation – Officially Speaking
Negotiations can be entered in to immediately any disputes arise and can save all parties a tremendous amount of time and money. An important point with negotiations is that should they fail, any offers that have been made during this process cannot later be referred to in court. This is with the proviso that they have been conducted “without prejudice”, as they should be.
If seemingly irreconcilable differences can be overcome during negotiations the process is cheap. Additionally, for them to succeed all parties need to feel that they have equal control, because without that talks will often breakdown leading to protracted and painful consequences.
Some companies opt for hiring barristers or chartered surveyors and so have ‘supported negotiations’. Having these professionals engaged can be extremely beneficial as they are level headed, experienced negotiators and can bring a spirit of non-adversity to the table.
Adjudication is a procedure often adopted while the contract work continues, and as a means of getting the workforce back on site. A strict tight timetable is adopted
either under the construction contract or by virtue of a statutory scheme. An adjudicator is appointed and makes a decision which is enforceable by the courts,
even though it may not provide a permanent long-term solution. While sometimes very effective, it is not suitable for those unable to get their act together in time to comply with the timetable.
Mediation in Construction & Engineering Disputes
A process that is strongly encouraged by the courts is mediation. A form of Alternative Dispute Resolution (ADR), Mediation is fast, effective and relatively informal. Conducted at a time that suits both parties with the assistance of an experienced mediator, the procedure is conducted in private .
The skilled mediator sets the scene for a mutually beneficial outcome. Unlike most other processes, the mediator does not make any decisions, his task is to facilitate the two parties to make their own binding agreement. This method of approach has a very high success rate.
Operating on a fixed fee basis that most parties find manageable, mediation services offer the option of parties having legal representation present. Turning a deadlocked dispute into an amicably settled issue is the goal of the skilled mediator. Saving the cost and possible penalties of litigation, mediation is low cost, flexible and fast.
It also helps to preserve the working relationships of everyone involved, so that it is more than possible to move on with the projects.
Going To Arbitration
Construction Dispute Arbitrationis a process which can allow you to avoid going through lengthy court processes – it is provided for in all the standard forms of contract, although these clauses can be excluded. Arbitration is a regularly used ADR process meant for settling disputes away from the courtroom. The entire process is presided over by a nominated arbitrator. It is conducted in private, ensuring that confidentiality is maintained.
One significant difference between this process and that of mediation is that the arbitrator makes a formal decision which is binding and enforceable through the courts. Courts can review these decisions, but only for misconduct on the part of the arbitrator, or depending on a agreement on a point of law. Otherwise, unlike the decision of a judge, whose decision may be open to appeal, the decision of an arbitrator is final.
While providing a binding decision, proceeding this way is often a lot less expensive than litigation and altogether faster. Parties have the option of agreeing on their arbitrator, or failing that one, with the relevant expertise will be appointed.
The Final Recourse: Litigation
People embroiled in international and domestic construction and engineering disputes go to court when the methods listed above are not suitable or have failed to produce a viable result. When in court, cases are proceeded on with witnesses being called, documents disclosed, barristers argue their points and experts are called upon to offer their opinions. Based on the complexity and value of any particular case, proceedings can be shifted across to a specialised Construction Court. Altogether this is a very expensive process and the value of the case can often be outstripped by the costs of the proceedings. Furthermore, because of the detailed procedure involved, and because the courts have a backlog of cases waiting to be heard, cases can last not only for months but sometimes years before a final conclusion is reached.
As anyone who is professionally involved in building projects will tell you, disputes are common in any construction contract. When an issue revolves around a legal interpretation, litigation is often the best course of action. However it is exacting and will deliver a binding decision that may or may not go your way. Even so the decision of the first court may be subject to appeal, and if this succeeds there may have to be a re-trial. One can readily see how of all construction dispute processes it burns up a lot of valuable time and resources.
What To Do Next…
This guide has covered in general terms the main topics related to construction disputes, looking first at the problems that cause them and then looking at the primary routes to finding the solutions. I hope that you have found it useful, and that enough light has been shed on the subject for you to feel confident in taking the next step to resolving your issues.
Most importantly, review your situation now and see if their is any more room for personal negotiations. If you feel that there may be an opportunity for more talking, carefully pursue that course before proceeding with anything more formal. If not you can contact me direct either by phone or email and I will be happy to help with your specific case.