CONFLICT AVOIDANCE - Three Important Lessons 23 September 2010

1. CONFLICT AVOIDANCE - Three Important Lessons 23 September 2010

2. The Speaker

3. Five essentials of a valid Contract Contract Formation • Offer • Can be withdrawn at any time • Must be capable of acceptance • Acceptance • Crystallisation of Contract; the ‘hammer’ falling • Communicate in writing is “BEST PRACTICE” • Unqualified acceptance of offer (Substantially) • Consideration • Benefit - usually money • Intention to form legal relations • Capacity

4. Beware of the pitfalls: Counter-Offers Perhaps looking like acceptance Qualified acceptance may not be counter-offer Be careful with language Battle of the Forms Last man standing: ours / yours / ours / yours / etc. Unqualified acceptance of offer (Substantially) Conduct Actions and reliance may imply acceptance Ask yourself: Is there a contract? Contract Formation

5. Letters of Intent are a topic in themselves Usually, a Letter of Intent merely expresses an intention to enter into a contract in the future, and creates no contractual liability. It is a question upon the facts of each case whether a Letter of Intent gives rise to any, and if so, what liability. Case study – EFW Plant £40M Civils Package Letters of Intent

6. The Contract

7. The five main elements of the Contract? Scope of Work What & Where? Specification How? Programme When - Start, Finish, Key Dates? Price Why? Terms and Conditions THE RULES OF THE GAME! Formation of Contract

8. Formation of Contract • The Contract creates obligations and transfers risks • between parties • 31 standard forms (JCT, ACA, ICE, NEC, MF/1, IChemE etc.) – ICE to adopt NEC • Identify your risks and obligations • Know your Contract.

9. Case Study – The Trust’s New Exhaust Stack JCT 2005 Design & Build £350K Stack Replacement Employer’s Requirements - the ‘loose vermiculite infill’ Contractor’s Proposals Conduct of CA The ‘Property Lawyer’ Variation or Obligation?

10. The ‘Loose’ Fill Lining

11. The New Exhaust Stack

12. The Outcome - Resolved When all else fails Corrected contract administration (obligation) Notice of Adjudication Proceedings suspended – settled Recovery Ratio 4/1

13. Scope Understand the scope of the works so that changes to it can be identified / quantified The scope is what is contained in the Contract! What documents constitute the scope? The scope is NOT: what is in the bid the same as the last job what we heard at the coffee machine! Understand The Contract

14. Understand the Contract Programme Both parties have obligations in terms of time under the Contract: • Contractor: to build the project to a pre-determined time with penalties for delay and to proceed regularly and diligently. • Client / Sub-Contractor: provide access, information, equipment, services to allow Contractor to complete their obligations.

15. Disputes Understand the Contractual provisions for the resolution of Disputes Understand the procedures for the application and resolution of the particular Dispute forum undertaken Termination - Summarily for cause?, On notice for cause?, Without cause on notice? Claims - must be proven: burden of proof? Evaluation Submission Negotiation Variations are priced. Key Administration Processes

16. Contract Administration Frequently used site records include: • Emails • Meeting Minutes • Programmes • Variation Orders • Progress Reports to Client • Site Logs • Site Diaries • Head Office Staff Involvement • Photographs • Timesheets • Allocation Sheets • Drawing Registers • Reports • Site Instructions • Delay Notices • Invoices. Records must be relevant, organised, referenced, contemporary and secure.

17. Contract Administration • Time Management • Monitor Programme • Identify Delays • Inform other party by Notice • Identify measures to mitigate delays • Maintain detailed records • Re-programme and re-budget • Accelerate at your risk (every £ spent is at risk).

18. Case Study – The Fire Damaged School JCT IFC98 with SCS and JCT98 CDP £2M 37 wk planned completion takes 74 wks Sectional Completion LAD’s

19. The Employer’s Contract Design

20. Project ‘Doomed’ to fail

21. The As Built Design

22. The Outcome - Resolved When all else fails Contract Administration Corrected Litigation (Public Purse: 3rd Party Decisions) Pre-Action Protocol Mediation Recovery Ratio 2/1

23. Management of the Client (Employer)andhis Engineer / CA / Architect

24. Managing the Client • In the event of a change the client is in an advantageous • position • You must avoid the temptation to “just get on with it”. The client may try to manipulate you into doing this for various reasons • Look to the contract. There will be provisions for dealing with changes. You must stand your ground and be contractually robust

25. Case Study – The New Build School JCT 98 £10M Sectional Completion (1000 pupils + 500 pupils) 55 wks planned -v- 78 wks actual A ‘failed’ Adjudication! Approx Quants / Prov Sums

26. Original Phasing ‘red-herring’

27. Revised Phasing ‘red-herring’

28. The Outcome - Resolved When all else fails Contract administration corrected Arbitration proceedings commenced Parallel negotiations resulted in settlement Recovery ratio 3/1

29. THREE IMPORTANT LESSONS

30. Three Important Lessons Max Abrahamson in his 1973 book ‘Engineering Law and the ICE Contract’ wrote, “A party to a dispute, particularly if there is arbitration, will learn three lessons (often too late): the importance of records, the importance of records and the importance of records.” These words remain true today Organisations still struggle with the issue that it is the Claimant who must keep the necessary records to evidence the cause and effect of the delay (loss) Unexpected grounds can be found to cast doubt on evidence that is not backed up by meticulously established records.

31. Beware of being “too helpful” If an instruction has not been provided by the client do not do any work without one Failure to have a written instruction to do work can result in the opportunity for both additional cost and time to be lost. Important Lessons

32. Be careful what you write Poor control over email communication can lead to significant problems The issue of email “chains” can change the meaning of the original email Poor copy control may result in emails finding their way to unintended recipients. Important Lessons Email is a powerful communication tool but needs to be controlled

33. Awareness of Contract Scope Be aware of the contract you are working to It is unlikely to be a carbon copy of the last one and you may be required to do something different. Obligations of other Parties to the Contract Understand what the Employer and / or other parties to the contract are required to do in order to support the project Understand how this relates to your own obligations. Important Lessons All members of the project team should have an understanding of the obligations to be discharged

34. Record the performance of other Parties If one of the other Parties to the project has not performed according to his obligations, ensure that this is formally recorded Their lack of performance is a “broken promise” which may result in additional cost to you. Important Lessons Preserve your contractual position by recording the performance of other parties

35. Disruption to your work by others If your action cannot be undertaken efficiently because of the lack of delivery by others, record the incidence of disruption / delay If you do identify disruption / delay, flag it up immediately. Important Lessons Don’t be controlled or affected by the inefficiencies of others

36. Don’t be afraid to raise the alarm If something seems unusual (or feels unreasonable), flag it up internally so a decision can be taken as to whether it is raised externally Your action may help to resolve a problem by dealing with the root cause You may help to ensure that you are paid for disruption and / or additional work. Important Lessons Early warning of a problem is critical to its effective solution

37. Confirm things in writing Oral agreements / understandings are of little use if one party to the agreement subsequently “forgets” Avoid “the Sahara syndrome” “The only things that are relevant are what has been written and what has been built…What is said is blown away like sand in the desert” Important Lessons Oral agreements / arrangements need to be confirmed in writing Beware - some standard forms do not contain an ‘oral instruction’ mechanism

38. Conflict – Mega Projects Jubilee Line Extension £1.8Bn to £3.5Bn • Scottish Parliament £50M to £431M - Lord Fraser’s report is fascinating • £762M Wembley Stadium - Multiplex and Cleveland Bridge ratio - £22M spent : £6M recovered.

39. The End Thank You www.blakenewport.co.uk