Transcript AMEC plc Preliminary Results 2007

CONFLICT AVOIDANCE
- Three Important Lessons
23 September 2010
The Speaker
Paul Bennett MSc FCIOB MCIArb

21 years engineering /
construction experience on
projects in UK & Europe

Building, Power, Process,
Offshore, Rail, Marine,
Engineering Construction

Blake Newport Senior Consultant
1997 to date

Past CIOB Centre Chair
Contract Formation
Five essentials of a valid Contract

Offer
– Can be withdrawn at any time
– Must be capable of acceptance
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Acceptance
– Crystallisation of Contract; the ‘hammer’ falling
– Communicate in writing is “BEST PRACTICE”
– Unqualified acceptance of offer (Substantially)
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Consideration
– Benefit - usually money

Intention to form legal relations

Capacity
Contract Formation
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)
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Conduct
– Actions and reliance may imply acceptance
– Ask yourself: Is there a contract?
Letters of Intent
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.
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It is a question upon the facts of each case whether a
Letter of Intent gives rise to any, and if so, what liability.
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Case study – EFW Plant £40M Civils Package
The Contract
Formation of Contract
The five main elements of the Contract?

Scope of Work
What & Where?
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Specification
How?

Programme
When - Start, Finish, Key Dates?
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Price
Why?
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Terms and Conditions
THE RULES OF THE GAME!
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.
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?
The ‘Loose’ Fill Lining
The New Exhaust Stack
The Outcome - Resolved
When all else fails
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Corrected contract administration (obligation)
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Notice of Adjudication
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Proceedings suspended – settled
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Recovery Ratio 4/1
Understand The Contract
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
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.
Key Administration Processes

Disputes
–
–
–

Claims - must be proven: burden of proof?
–
–
–
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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?
Evaluation
Submission
Negotiation
Variations are priced.
Contract Administration
Frequently used site records include:
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Emails
Meeting Minutes
Programmes
Variation Orders
Progress Reports to Client
Site Logs
Site Diaries
Head Office Staff Involvement
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Photographs
 Timesheets
 Allocation Sheets
 Drawing Registers
 Reports
 Site Instructions
 Delay Notices
 Invoices.
Records must be relevant, organised, referenced, contemporary and secure.
Contract Administration
Time Management
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Monitor Programme
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Identify Delays
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Inform other party by Notice
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Identify measures to mitigate delays
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Maintain detailed records
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Re-programme and re-budget
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Accelerate at your risk (every £ spent is at risk).
Case Study – The Fire Damaged
School
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JCT IFC98 with SCS and
JCT98 CDP
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£2M

37 wk planned completion
takes 74 wks

Sectional Completion
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LAD’s
The Employer’s Contract Design
Project ‘Doomed’ to fail
The As Built Design
The Outcome - Resolved
When all else fails

Contract Administration Corrected

Litigation (Public Purse: 3rd Party Decisions)
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Pre-Action Protocol

Mediation

Recovery Ratio 2/1
Management of the Client (Employer)
and
his Engineer / CA / Architect
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
Case Study – The New Build School

JCT 98
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£10M

Sectional Completion (1000 pupils
+ 500 pupils)

55 wks planned -v- 78 wks actual

A ‘failed’ Adjudication!

Approx Quants / Prov Sums
Original Phasing ‘red-herring’
Revised Phasing ‘red-herring’
The Outcome - Resolved
When all else fails
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Contract administration corrected
Arbitration proceedings commenced
Parallel negotiations resulted in settlement
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Recovery ratio 3/1
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THREE IMPORTANT LESSONS
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.
Important Lessons

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

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.
Email is a powerful communication tool but needs to be controlled
Important Lessons
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Awareness of Contract Scope
–
–
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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
–
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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.
All members of the project team should have an understanding of the
obligations to be discharged
Important Lessons

Record the performance of other Parties
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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.
Preserve your contractual position by recording the performance
of other parties
Important Lessons

Disruption to your work by others
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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.
Don’t be controlled or affected by the inefficiencies of others
Important Lessons
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Don’t be afraid to raise the alarm
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If something seems unusual (or feels unreasonable), flag it up
internally so a decision can be taken as to whether it is raised
externally
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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.
Early warning of a problem is critical to its effective solution
Important Lessons
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Confirm things in writing
–
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Oral agreements / understandings are of little use if one party to
the agreement subsequently “forgets”
Avoid “the Sahara syndrome”
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“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”
Oral agreements / arrangements need to be confirmed in writing
Beware - some standard forms do not contain an ‘oral instruction’ mechanism
Conflict – Mega Projects
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Jubilee Line Extension £1.8Bn to £3.5Bn
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Scottish Parliament £50M to £431M
- Lord Fraser’s report is fascinating
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£762M Wembley Stadium
- Multiplex and Cleveland Bridge ratio - £22M spent : £6M
recovered.
The End
Thank You
www.blakenewport.co.uk