No party sets out intending a contract to end in dispute. Ending up in a dispute over a contract can be a very risky, time-consuming and costly experience – and at worst can irreparably damage working relationships.
Our latest NEC Clinic with Dr Stuart Kings broke down the best practice to avoid disputes arising – along with how to handle a dispute if one does arise.
Prevention is the best cure – and in avoiding disputes, there are three key things to consider.
Doing the right thing
This isn’t just about acting virtuously and in the best interests of the project or client – it’s about getting everything right in the set up of your contract to foster the greatest levels of efficiency and success.
It might seem like common sense, but there are lots of considerations when laying out a contract, particularly where amendments may be needed to suit specific situations. Getting everything nailed down correctly from that step is vital to success and a hugely protective measure moving forwards. It’s just a case of making sure that everything is covered effectively, meaning that there is complete clarity across the project team.
The NEC is extremely clear on procedures and deadlines, where other contract types may be a bit more forgiving. This is like comparing driving a standard road car to a Formula 1 car. The NEC contract needs to be set up and used in a specific way, just in the same way as a Formula 1 car, which you can’t simply get in and drive away.
This all may sound like a complicated and potentially daunting task – especially considering its importance. However, it doesn’t need to be. We have developed an ECC4 checklist specifically to help people navigate their contract set up. This checklist summarises clauses, responsibilities and actions to be taken – helping you create a complete abstract and journey to setting up your contract correctly. This makes sure no steps are missed, which may otherwise lead to or complicate a potential dispute in the future.
Managing the relationship
So much in the construction industry comes down to relationships and managing different personalities – and this all has a part to play in avoiding or managing disputes too.
The reality is that historic relationships and personality will creep into decision-making and bias. If a key stakeholder is set on pursuing a dispute, it’s unlikely they will back down, which is exactly why investing time into building and managing relationships across the whole project team is so vitally important.
Some of the more effective projects are those that incorporate joint training on the ins and outs of the contract at the very outset of work. This makes sure that the contractor, client and consultants have a detailed understanding and joint understanding – particularly of any project specific elements, including amendments to the contract.
This then feeds into effective management throughout the contract. More proactive and collaborative teams have a greater chance of success – helping again to protect against undesired outcomes. It’s these teams that are holding meetings with the right people at the right time, allowing them to identify any trends and understand the root causes for any compensation events or issues – all of which helps to grow understanding where potential risks are in the future.
When considering statistics on construction adjudication citing that 48% of disputes resulting from a ‘lack of competence of project participants’, it’s easy to understand just how beneficial such training and improved understanding could reduce the level of disputes in the sector.
Understanding the key areas where disputes may happen
If you know what the typical areas of disputes are, you are one step ahead in preventing them by knowing what to watch out for. Generally, disputes will centre around time or money issues, but observing and learning from early warnings and trends across every project not only helps improve risk avoidance on that particular contract, but also for similar ones in the future – whether that’s down to the project type, or the make up of the project team.
Collaboration remains key, and a telltale sign of dispute risk is when the Programme is not accepted. This can be rectified by getting the right stakeholders and project team members together at the right point to review critical elements – whether that’s:
• Reviewing the Programme before submission to increase the chance of acceptance
• Reviewing compensation events together, including discussion on Project Manager assumptions, time and cost impacts, and how to ensure the best value for the client
Construction professionals should be working collaboratively in the interests of the project and client.
Digital solutions
With regular project meetings and a centralised tool like Sypro in place, teams can completely streamline their processes – not only reducing the administrative and time burden, but also protect against unnecessary disputes that may otherwise arise from poor contract management.
Within Sypro, our system flags actions and responsibilities, and users have the ability to organise that list in a number of ways, being able to highlight their own personal actions, or those across their team. This is all shown in a simple red, amber, green system – allowing users to see their required tasks quickly and easily every day.
It is worth highlighting Clause 13.2, which was amended under NEC4 to reflect the use of collaborative software like our own at Sypro. The clause details that “if the Scope specifies the use of a communication system, a communication has effect when it is communicated through the communication system specified in the Scope.”
In basic terms, this means that is a system is named within the Scope of the contract, project teams must ensure all communications are run through it. Any communications like emails, or WhatsApp or Teams messages would not be counted as recorded communications in this instance, which could ultimately cause issues leading to or resolving a dispute.
You can watch back the session where Dr Stuart Kings runs through these tips for avoiding disputes – as well as how to manage the process forward if disputes do arise.
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