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CMG CONSTRUCTION CONTRACTS CONFERENCE DEIRDRE HENNESSY, SENIOR ASSOCIATE BYRNE WALLACE

CMG CONSTRUCTION CONTRACTS CONFERENCE DEIRDRE HENNESSY, SENIOR ASSOCIATE BYRNE WALLACE. PUBLIC WORKS CONTRACTS. INTRODUCTION:. DEPT OF PUBLIC EXPENDITURE AND REFORM – RESPONSIBLE FOR NATIONAL POLICY ON PUBLIC PROCUREMENT CAPITAL WORKS MANAGEMENT FRAMEWORK –

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CMG CONSTRUCTION CONTRACTS CONFERENCE DEIRDRE HENNESSY, SENIOR ASSOCIATE BYRNE WALLACE

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  1. CMG CONSTRUCTION CONTRACTS CONFERENCEDEIRDRE HENNESSY, SENIOR ASSOCIATE BYRNE WALLACE

  2. PUBLIC WORKS CONTRACTS

  3. INTRODUCTION: • DEPT OF PUBLIC EXPENDITURE AND REFORM – RESPONSIBLE FOR NATIONAL POLICY ON PUBLIC PROCUREMENT • CAPITAL WORKS MANAGEMENT FRAMEWORK – WWW.CONSTRUCTIONPROCUREMENT.GOV .IE • PUBLIC WORKS CONTRACTS – 2006 • 2014 – GOVERNMENT REVIEW CHANGES (2016) STATUS OF BILL OF QUANTITIES /PRICING DOCUMENT REVISED DISPUTE PROCESS NOTICES OF DISSATISFACTION REVISED SPECIALIST TENDERING NEW TENDER AWARD CRITERIA

  4. Construction Contracts Act 2013 PWC - RECENT CHANGES - Introduction TWO RECENT CIRCULARS -Circular 10/2018 – Amendment to threshold amounts for use of Short Form Contracts - Circular 08/2018- Amendments to reflect SEO’s and Amendments to the Comparative Cost of Tender Process

  5. Recent Changes – Continued… CIRCULAR 10/2018 – • Amended the threshold for use of the Short Form PWC from an estimated value of €500,000.00 to €1,000,000.00 • Updated the legislative references to new legal provisions introduced in relation to SEO’s • Clause 5 amended to include Sectoral Employment Orders • Any contracts awarded pre May 2018 – cannot recover additional costs incurred as a result of SEO’s unless can make a case for it under Clause 10.6.4 • Changes the manner in which the Comparative Cost of Tender process is undertaken – Forms of Tender and Schedule amended

  6. Recent Changes - Continued 6th June 2018 – • Amended forms of FTS1-FTS5, FTS13 and ITT-W1, ITT-W1a, ITT-W2and ITT-W8 published to include revised Comparative Cost of Tender • If tender submission date is prior to 7 July 2018 no action required 27th June 2018 - • Amended forms of PW-CF1 –PW-CF5 and MF 1.13 were published. • Apply to all tenders submitted on or after 7 July 2018

  7. BILL OF QUANTITIES STATUS OF BILL OF QUANTITIES • Effective from April 2016 • PW- CF1, PW-CF3 AND PW-CF5 – Bill now a compensation event • Previous position - financial risk of difference between the BOQ and the works requirements - contractor risk • New position - financial risk now set out in Schedule Part 1K,17: A difference between the Contract value of the Works according to the quantities and descriptions in the Pricing Document and the Contract value of the Works described in the Works Requirements, because the Pricing Document, when compared with the Works Requirements includes an incorrect quantity or includes an item that that is not included in the Works Requirements or

  8. BILL OF QUANTITIES excludes an item that is included in the Works Requirements or gives an incorrect item description and the difference for an item in, or that should have been in, the Pricing Document is more than €500. Then….no delay event but ISa compensation event– EMPLOYER RISK

  9. BILL OF QUANTITIES • Risks not compensated under Schedule Part 1 K override Schedule Part 1 K, 17 • For example – Ground Conditions (Part I K, 19)

  10. BILL OF QUANTITIES IMPLICATIONS FOR CONTRACTING AUTHORITIES: • BOQ will prevail in relation to contract sum • Must employ fully qualified cost consultant to prepare fully marked BOQ from the design • Complete design must be prepared • Design team appointment crucial • BOQ will be base document for any additions and valuing interim payments

  11. BILL OF QUANTITIES POINTS FOR CONTRACTORS: • The contractor must pay particular attention to the BOQ submitted with the tender documents and must price its tender based on those quantities and work descriptions as opposed to the WR. • The overriding criteria for the contract will continue to be the lowest price/most economically advantageous tender but the BOQ will be used as the document to evaluate those tender submissions. • Check that the BOQ has been prepared by a cost consultant. Is it prepared correctly and in accordance with the specified rules of measurement? If not this matter should be raised with the employer and a properly measured bill should be obtained before any tender is submitted. • Has the BOQ been prepared with complete design information? The contractor should analyse the WR versus the description for the items in the BOQ to ensure that full information has been provided. If there are any anomalies or discrepancies at this point they should be raised and responded to before the contractor submits a price.

  12. BILL OF QUANTITIES • The guidance note for Contracting Authorities is very specific about the Employer’s obligations in relation to the preparation of the information required in order to input into the pricing document and, therefore, if this task is not properly carried out by the design team it may lead to an avenue for the contractor to claim for full discrepancies against the employer at a later date. • If a contractor calls for a check on the quantities during the contract and it transpires there is no error/discrepancy then they will have to cover the Employer’s costs of carrying out the check. • Contractors should engage a qualified quantity surveyor to assess the tender documents and assist with the tender price to be submitted.

  13. REVISED DISPUTE PROCESS REVISED DISPUTE PROCESS: • WITHOUT PREJUDICE DISCUSSIONS • DISPUTE MANAGEMENT PROCEDURE • CONCILIATION • ARBITRATION • ADJUDICATION • IRISH COURTS

  14. Recent Changes – REVISED DISPUTE PROCESS • PWCF1- PWCF 4 – • DISPUTES UNDER CLAUSE 10.5.4 OR 10.5.5 can be referred to without prejudice process prior to conciliation dispute management procedure consists of meetings of the Project Board • CLAUSE 13.1.2 – sets up the Project Board • PROJECT BOARD - individuals identified in Schedule Part 3a – persons nominated to represent the Parties • SCHEDULE PART 1A – Employer selects no. of people to make up the Project Board – minimum 1 and max 3 • Details of persons must be contained in the letter of acceptance

  15. REVISED DISPUTE PROCESS • At least one member must hold a construction related role in each Party’s organisation; • Employer’s Representative or Contractor’s representative or design team members cannot be members of the Project Board; • Members should have authority to negotiate agreements which are binding on the party; • External people can be appointed – should have knowledge of construction industry, commercial and technical dispute resolution, alternative dispute resolution methods, commercial decision making, commercial negotiation

  16. REVISED DISPUTE PROCESS • FUNCTION OF THE PROJECT BOARD: Solely to review disputed Employer representative Determinations issue under Sub-clause 10.5.4 and 10.5.5 which have been referred under clause 13.1 of the Contract The Board must hold a preliminary meeting within 28 days of the Letter of Acceptance Must agree a Protocol for all future meetings and a schedule of dates for standing meetings Operation procedures are at discretion of the Board All Board communications are WITHOUT PREJUDICE Project Board must meet at least every 60 DAYS to review and discuss the disputes referred to it Where no agreement is reached at the first meeting following the referral the Board must inform the Parties and either Party can refer the dispute under Clause 13.2

  17. REVISED DISPUTE PROCESS • If the dispute is not referred then the original Employer’s Representative Determination is binding • Shall not review any other dispute under the contract – only those re 10.5.4 and 10.5.5. • ADJUDICATION – If a matter is referred to Adjudication where the dispute process has commenced – process is suspended pending outcome of Adjudication If Adjudicator makes Decision – dispute process terminates If no Decision – dispute process re-commences

  18. Recent Changes – REVISED DISPUTE PROCESS • CONCILIATION: • Clause 13.2 sets out the process • Notice of Referral must state it is given under Clause 13.2 • PWCF1-PWCF4 – Where a Standing Conciliator is appointed, they shall act as the Conciliator • If Adjudication is issued while a matter is in Conciliation – Conciliation must adjourn pending outcome of Adjudication • If Adjudicator reaches Decision – Conciliation terminates • If no Decision – Conciliation recommences

  19. Recent Changes – REVISED DISPUTE PROCESS THE STANDING CONCILIATOR For all contracts under PW-CF1 to PW-CF4 where contract sum expected to be less than €10m –optional but mandatory for contracts with a sum in excess of €10m Employer has option of appointing a Standing Conciliator - Where appointed, the Standing Conciliator fulfils the role of Conciliator for all disputes referred to Conciliation – Intended to encourage proper engagement by the Parties to assist them in avoiding disputes and to avoid costly and lengthy dispute procedures – Standing Conciliator shall be issued with full set of contract documents Shall attend site meetings on a regular basis Included in correspondence re clause 4.9, (prog.)4.10 (progress reports) and 4.15 (meetings)from each party

  20. Recent Changes – REVISED DISPUTE PROCESS • Where dispute is referred to Conciliation under Clause 13.2 Standing Conciliator must act as Conciliator • Relationship between the Standing Conciliator and the Project Board must be carefully managed • Standing Conciliator can get involved in Project Board with agreement of the Parties

  21. Notices of Dissatisfaction NOTICES OF DISSATISFACTION – CLAUSE 13 Clause 13.1 Where either Party is dissatisfied with the Conciliator’s Recommendation, it may, within 42 days after receiving the Conciliator’s Recommendation, so notify the other Party. If a Notice of Dissatisfaction has been given either Party may refer the matter to Arbitration under Clause 13.3.

  22. Notices of Dissatisfaction Clause 13.1 – If Payment Recommended Where the Conciliator has recommended a payment of money and a notice of dissatisfaction is served then: • Party concerned shall make the payment provided the other Party first (a) gave notice complying with the arbitration rules referred to in Clause 13.3, referring the dispute to arbitration and (b) gave the paying party a bond for the amount of the payment.

  23. Notices of Dissatisfaction The BAM case: BAM Building Ltd v UCD Property Development Co Ltd [2016] IEHC 582 (20 October 2016): The issue before the court was whether the dispute as to whether or not the defendant was liable to pay the sum recommended by the conciliator pending the arbitration, should be determined by the High Court or by the arbitrator. The court held that the starting point for interpretation of any arbitration clause should be on the basis of an assumption that unless the language makes clear that certain questions are excluded from the arbitrator’s jurisdiction, all disputes should be referred to arbitration. Quite apart from the presumption that Clause 13 should be interpreted on the basis that the parties intended that all disputes arising out of the conciliation should be capable of referral to arbitration, the text of Clause 13 also pointed in that direction.

  24. Notices of Dissatisfaction Accordingly, the issue was a matter for the arbitrator to decide and the court stayed the proceedings pursuant to Article 8(1) of the Model Law. Implications of BAM Case: - Will this discourage parties from Conciliation if they cannot get paid - Encourage them to adjudicate instead?

  25. Notices of Dissatisfaction Kelly’s of Fantane (Concrete) Limited (In Receivership) v Bowen Construction Limited [2017 No.272 S] • This case concerned an application for Summary Judgment to enforce a Conciliator’s Recommendation • Contract was for paving works by Sub-contractor for Main Contractor on N7 • Clause 13.1.11 – the party concerned shall make the payment recommended by the Conciliator provided that the other party first • Gave a notice under 13.2 referring the same dispute to arbitration and • Gave the paying party a bond in the amount of the payment • The Defendants argued that they should not have to pay the sum as the Plaintiff did not comply with 13.1.11(b) – did not refer the same dispute and that pursuant to Clause 12 the sub-contract had been terminated • “If a party fails to comply with a conciliator’s recommendation which is binding, the other party may take such court proceedings as are appropriate to force compliance with the conciliator’s recommendation without availing further of the conciliation or arbitration process” (Clause 13(b)(5) of the sub-contract).

  26. Notices of Dissatisfaction Matter before the Court was whether the Defendants have met the threshold required for the issue of payment of the Conciliator’s Recommendation to be remitted to plenary hearing Court found in favour of the Plaintiff– The terms of the contract clearly envisage a situation where the amount recommended might be varied by the arbitral award. If the Plaintiff obtains summary judgment, it does no more than give effect to Clause 13… The obligation to pay the recommended sum once a bond has been provided and the matter has been referred to arbitration is a binding obligation because that is what the parties have agreed…

  27. Notices of Dissatisfaction • This was a strong endorsement of the binding nature of Conciliator’s Recommendation • Must be distinguished from BAM case due to sub-contract Clause 13(5)(b).

  28. Revised Specialist Tendering Process REVISED SPECIALIST TENDERING PROCESS • Procedure for Contracting Authorities to directly obtain tenders from Specialists who are to be appointed by Contractors – Reserved Specialists • Only refers to PW-CF1, CF3and CF5 • The revised 2016 Reserved Specialist procedure replaces the procedure where Specialists proposed by tendering Contractors could be determined by the contracting authority as being suitable for appointment on Employer design contracts. Whilst the Reserved Specialist procedure is not available on Contractor design contracts, pre-qualification of Specialists continues to be available

  29. New Tender Award Criteria NEW TENDER AWARD CRITERIA Guidance Note 1.0 v1.1 dated 21 January 2019.

  30. SECTORAL EMPLOYMENT ORDERS COST RECOVERY

  31. The former REA system (1946-2013) • Permitted trade unions and employers to make “employment agreements”. • These could be registered by the Labour Court and thereby become “REAs”. • Could apply in individual undertakings or across whole sectors. • Set terms and conditions of employment in construction; electrical contracting; Dublin retail drapery. • McGowan case – McGowan v Labour Court Ireland & Ors 2013 2013 IESC 21 (9 May 2013) the entire mechanism for creating REAs was struck downas unconstitutional.

  32. SEO Systems • Sectoral wage-setting now called “sectoral employment orders” (“SEOs”). • SEOs not structured as agreements – Labour Court to make recommendations to the Minister. • Application can be made for an SEO by a trade union or employer organisation or jointly by both.

  33. Process for making SEOs • Application by union or employer(s) or both. • Court determines whether application can be examined. • If so, Court invites submissions from interested parties. • Court considers matters by reference to statutory criteria. • Court can make recommendation about certain conditions of employment to the Minister. • Minister can make the SEO, subject to possible annulment by Oireachtas.

  34. Labour Court: jurisdictional requirements • Trade union requester must be “substantially representative of workers of the particular class, type or group in the economic sector” concerned. • Employer organisation requester must be substantially representative of the employers of a [sufficient] number of workers in that sector. • The request must apply to all of the workers in the class/type/group concerned. • It is a “normal or desirable practice” or it is “expedient” to have separate terms for that particular class/type/group. • Any recommendation is likely to “promote harmonious relations” between relevant workers and employers.

  35. Labour Court: substantive examination Court shall have regard to the following: • Potential impact on the levels of employment and unemployment in the sector. • Any relevant national wage agreement. • Potential impact on competitiveness in the sector. • General level of remuneration in other economic sectors in which workers of the same class, type or group are employed. • That the SEO shall be binding on all workers and employers concerned.

  36. Provisions that can be included in an SEO • A minimum hourly rate of pay. • Not more than 2 higher rates based on skills or length of service. • Lower rates for young or unskilled workers, apprentices. • Premiums for shift work, piece work, overtime, unsocial hours, Sunday work, travel time. • Pension scheme. • Sick pay.

  37. Other provisions • Provides for civil, not criminal enforcement. • Compensation from adjudication officers: up to 104 weeks’ pay. • Exemptions for employers who are unable to pay. • No new applications can be made within 12 months of making of SEO except in exceptional circumstances. • Prohibitions on penalisation.

  38. Construction sector SEO 2017 • Has effect from 19 October 2017 • Applies to all “building firms” and “civil engineering firms” as defined in the Order. • Compulsory rates of pay; pension; sick pay for the categories of workers as defined in the order. • Contains a dispute resolution procedure to be utilised in the event of a dispute arising over a term in the Order.

  39. The hot topics • Application for a new SEO in the construction sector to replace SI 455/2017, the Sectoral Employment Order (Construction Sector) 2017: Construction Unions seeking a phased 12% increase in pay. Labour Court hearing held 22nd March 2019 – Court has 6 weeks from the hearing date to make recommendations to the Minister Thereafter Minister will have six weeks to approve the Court’s Recommendations Even if accepted unlikely to come into effect for some months. • Application for a new SEO in the electrical contracting sector: Labour Court hearing held 14th March 2019 -

  40. Thank you – Any questions?

  41. Dhennessy@byrnewallace.com88 Harcourt Street, Dublin 2, D02 DK18, Ireland

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