‘Arbitration: A process whereby the parties voluntarily refer their disputes to an impartial third person selected by them for a decision based on evidence and arguments presented before the arbitration tribunal. The parties agree in advance that the arbitrator’s decision will be final and binding” – Prof. Martin (father of American Arbitration).
My current occupation is a Quantity Surveyor for a Civil Engineering Building Contractor. Many contracts are formed between our Company and Government Agencies, Local Authorities and Private Clients. We also deal with a large amount of supplier contracts and sub-contracts with specialist contractors. It is therefore a vital part of my role and responsibility to maintain a high level of knowledge of Contract Law and knowledge of the various forms of contract within the Construction Industry. An integral part of Contract Law and indeed the forms of contract are the arbitration agreements that are in place.
The procurement and contracting arrangements in Ireland for Public Sector contracts (and to a certain extent for Private Contracts) has evolved over the last three decades at an accelerated pace. The pace of these contractual changes and arrangements perhaps could be tracked with the large scale infrastructure construction over the last three decades. A roadmap of Ireland back in 1980 in comparison to a present one would look very different. The same could be said for procurement changes, although the establishment of EU procurement procedures must be acknowledged as a strong influence on the Irish procurement changes.
One historic example of an older, simpler arrangement between client and contractor was the first by-pass road of Athlone, where work commenced in 1984. This work was directly carried out by the local authority and the large excavators and plant were contracted by means of a ‘plant hire’ arrangement. This type of contract for such a complex and large scale infrastructure project would be unheard of today. The more the larger scale contracts came on stream, the more local authorities and government agencies had to establish the best practice in putting in place and establishing the best Form of Construction Contract to suit the particular project.
This was a challenge that obviously was dealt with outside Ireland. In the late 1990’s studies and reports were carried out in the UK. These reports were undertaken in order to establish value for money in Public Sector Construction Contracts. It is more than probable that these reports and studies carried out in the UK, such as the Latham Report in 1994 and the Egan Report in 1998, were utilized and read by our Government Departments at the time to establish the best practice in both procurement arrangements and the appropriate form(s) of contract and procurement models to be used.
There are key questions that should now be considered, with the benefit of hindsight, from this frantic time of expansion and evolution: did the Government changes to the Public Sector Contracts and alternative procurement models happen quickly enough to keep up with the pace to which the works were required and getting done? Did Ireland learn quickly enough from our UK neighbours and the financial mistakes that happened in large scale UK infrastructure projects? And moving to today, is the implementation of the new Public Sector Forms of Contract now too much too late? It is perhaps appropriate to quote one of our neighbour’s greatest leaders, Winston Churchill, who said “there is nothing wrong with change, if it’s in the right direction”.
There is perhaps enough evidence to show that huge mistakes were made at the expense of the taxpayer. These mistakes include the Carrickmines Protest, Glen of the Downs Protest, the Dublin Port Tunnel dispute, the Limerick Drainage dispute, and the difficulties with Eyre Square in Galway and the list goes on. All of the contractual disputes on these Public Sector Contracts could have been eradicated or the consequences of these mistakes lessoned if we had implemented change to our forms of contract or procurement model at an earlier stage, based on what we learnt from each contractual experience. So it is perhaps fair to say that, following from recent past mistakes, that we in the Construction Industry only changed our Contracting models in a reactive manner, after mistakes were made.
Evidence of this is borne out, for example, in that only after several disputes on large motorway projects that involved additional cost and expense and delays to the progress of the works, where measure and value type contracts were utilized, did we in Ireland introduce the design and build model which previous studies and actual results had shown enable greater cost certainty.
Even over the last few months in the news have we heard that the procurement of the proposed super prison at Throntan Hall could be in jeopardy? This is possibly a result of the failure of the PPP model (Public Private Partnership procurement model) where the private funding costs have escalated due to the economic downturn. It is now evident that this PPP model will only be functional at a time of economic stability and is perhaps a defunct procurement model in a difficult economic climate.
It is too early to tell whether the New Public Sector Forms of Contract will be a success, but the general consensus amongst the Contractors who carry out Public Sector Projects is that the burden of risk transferred from the Employer (the Government) to the Contractors is far too great. Clauses contained in these Contracts are already titled and attributed back to the arguably ill-managed Contracts that influenced them, such as the Employee Pay and Conditions Clause (known as the Gamma Clause) and the risk the Contractors must take on board if civil disturbances arise during a contract (the Carrickmines Clause) and the termination clause (an attempt to write out the Limerick County Council v Uniform Construction Ltd decision, High Court, Commercial, Nov 05, Clarke J, (€70m spent on a €10m tendered project)). I would argue that the learning from earlier, less successful contracts resulted in an overly aggressive determination on the government’s part to refuse the contractor recourse to reasonable compensation for unforeseen occurrences that will continue to form part of the daily life of a civil engineering job. In short, the Government has taken the maxim ‘once bitten, twice shy’, to extremes.
So as the nature of Contracting is changing in the Irish Construction Sector one must be prepared to understand it from a professional viewpoint, through the daily encounters with jobs and from a reflective standpoint, through further education and lifelong learning.
It is evident that in ones day to day role of dealing with Contracts where several elements may be sub-contracted to separate parties that it is key for contracting companies to ensure that there is an Arbitration Agreement in place for all of these Contracts and moreover it is best practice to include a Joinder Arbitration Clause that binds all the parties under one Arbitration Agreement on typical contracts where numerous parties will be involved.
It is also vital to ensure that even with the most minor value sub-contracts that a reference is on the sub-contract order to the Form of Contract the sub-contractor would be working to; thus informing them that their contract contains an arbitration clause in the Contract Conditions. A further recommendation would be to include some alternative form of dispute resolution to contracting parties such as conciliation or mediation. This could be implemented as a contract condition and the ADR could be a first step at trying to resolve disputes prior to bringing the dispute to arbitration. This is beneficial from a commercial viewpoint where the costs of an arbitration process could be avoided.
An important aspect to note for day to day dealings in the construction industry is that if a case ends up in arbitration, that clear records are absolutely vital. Max Abrahamson has a popular quotation in relation to construction industry claims as follows: “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”.
It is also clear that a strong case with a good degree of records and evidence presented to the respondents may lead to the claim getting settled at an early stage and may allow the avoidance of arbitration. It is therefore crucial for me in my current organization that we implement top quality record keeping on all our sites and we also ensure that these records are copied to our clients for signing. In order to encourage good record keeping, the personnel charged with keeping these records, normally carried out by a trainee Engineer or Site Clerk, are told of their possible future importance and value. The implementation of email and more recently the use of broadband enable more active monitoring and auditing of these site records.
History in the industry and the flaws of the traditional forms of Contract and thier associated unsatisfactory risk apportionment have resulted in the New GCCC Forms of Contract, with all its future challenges ahead of us. .
History is a fine teacher- I believe that an adversarial relationship between client and contractor will inevitably lead to more arbitrations and more cost. My earnest aspiration, for the Industry, is that we, clients and contractors will learn and develop through understanding and finding points of agreement, rather than perpetuating a combative history, which benefits no one, and costs many.
Perhaps the New Form of Contract is the starting line for us both.
My current occupation is a Quantity Surveyor for a Civil Engineering Building Contractor. Many contracts are formed between our Company and Government Agencies, Local Authorities and Private Clients. We also deal with a large amount of supplier contracts and sub-contracts with specialist contractors. It is therefore a vital part of my role and responsibility to maintain a high level of knowledge of Contract Law and knowledge of the various forms of contract within the Construction Industry. An integral part of Contract Law and indeed the forms of contract are the arbitration agreements that are in place.
The procurement and contracting arrangements in Ireland for Public Sector contracts (and to a certain extent for Private Contracts) has evolved over the last three decades at an accelerated pace. The pace of these contractual changes and arrangements perhaps could be tracked with the large scale infrastructure construction over the last three decades. A roadmap of Ireland back in 1980 in comparison to a present one would look very different. The same could be said for procurement changes, although the establishment of EU procurement procedures must be acknowledged as a strong influence on the Irish procurement changes.
One historic example of an older, simpler arrangement between client and contractor was the first by-pass road of Athlone, where work commenced in 1984. This work was directly carried out by the local authority and the large excavators and plant were contracted by means of a ‘plant hire’ arrangement. This type of contract for such a complex and large scale infrastructure project would be unheard of today. The more the larger scale contracts came on stream, the more local authorities and government agencies had to establish the best practice in putting in place and establishing the best Form of Construction Contract to suit the particular project.
This was a challenge that obviously was dealt with outside Ireland. In the late 1990’s studies and reports were carried out in the UK. These reports were undertaken in order to establish value for money in Public Sector Construction Contracts. It is more than probable that these reports and studies carried out in the UK, such as the Latham Report in 1994 and the Egan Report in 1998, were utilized and read by our Government Departments at the time to establish the best practice in both procurement arrangements and the appropriate form(s) of contract and procurement models to be used.
There are key questions that should now be considered, with the benefit of hindsight, from this frantic time of expansion and evolution: did the Government changes to the Public Sector Contracts and alternative procurement models happen quickly enough to keep up with the pace to which the works were required and getting done? Did Ireland learn quickly enough from our UK neighbours and the financial mistakes that happened in large scale UK infrastructure projects? And moving to today, is the implementation of the new Public Sector Forms of Contract now too much too late? It is perhaps appropriate to quote one of our neighbour’s greatest leaders, Winston Churchill, who said “there is nothing wrong with change, if it’s in the right direction”.
There is perhaps enough evidence to show that huge mistakes were made at the expense of the taxpayer. These mistakes include the Carrickmines Protest, Glen of the Downs Protest, the Dublin Port Tunnel dispute, the Limerick Drainage dispute, and the difficulties with Eyre Square in Galway and the list goes on. All of the contractual disputes on these Public Sector Contracts could have been eradicated or the consequences of these mistakes lessoned if we had implemented change to our forms of contract or procurement model at an earlier stage, based on what we learnt from each contractual experience. So it is perhaps fair to say that, following from recent past mistakes, that we in the Construction Industry only changed our Contracting models in a reactive manner, after mistakes were made.
Evidence of this is borne out, for example, in that only after several disputes on large motorway projects that involved additional cost and expense and delays to the progress of the works, where measure and value type contracts were utilized, did we in Ireland introduce the design and build model which previous studies and actual results had shown enable greater cost certainty.
Even over the last few months in the news have we heard that the procurement of the proposed super prison at Throntan Hall could be in jeopardy? This is possibly a result of the failure of the PPP model (Public Private Partnership procurement model) where the private funding costs have escalated due to the economic downturn. It is now evident that this PPP model will only be functional at a time of economic stability and is perhaps a defunct procurement model in a difficult economic climate.
It is too early to tell whether the New Public Sector Forms of Contract will be a success, but the general consensus amongst the Contractors who carry out Public Sector Projects is that the burden of risk transferred from the Employer (the Government) to the Contractors is far too great. Clauses contained in these Contracts are already titled and attributed back to the arguably ill-managed Contracts that influenced them, such as the Employee Pay and Conditions Clause (known as the Gamma Clause) and the risk the Contractors must take on board if civil disturbances arise during a contract (the Carrickmines Clause) and the termination clause (an attempt to write out the Limerick County Council v Uniform Construction Ltd decision, High Court, Commercial, Nov 05, Clarke J, (€70m spent on a €10m tendered project)). I would argue that the learning from earlier, less successful contracts resulted in an overly aggressive determination on the government’s part to refuse the contractor recourse to reasonable compensation for unforeseen occurrences that will continue to form part of the daily life of a civil engineering job. In short, the Government has taken the maxim ‘once bitten, twice shy’, to extremes.
So as the nature of Contracting is changing in the Irish Construction Sector one must be prepared to understand it from a professional viewpoint, through the daily encounters with jobs and from a reflective standpoint, through further education and lifelong learning.
It is evident that in ones day to day role of dealing with Contracts where several elements may be sub-contracted to separate parties that it is key for contracting companies to ensure that there is an Arbitration Agreement in place for all of these Contracts and moreover it is best practice to include a Joinder Arbitration Clause that binds all the parties under one Arbitration Agreement on typical contracts where numerous parties will be involved.
It is also vital to ensure that even with the most minor value sub-contracts that a reference is on the sub-contract order to the Form of Contract the sub-contractor would be working to; thus informing them that their contract contains an arbitration clause in the Contract Conditions. A further recommendation would be to include some alternative form of dispute resolution to contracting parties such as conciliation or mediation. This could be implemented as a contract condition and the ADR could be a first step at trying to resolve disputes prior to bringing the dispute to arbitration. This is beneficial from a commercial viewpoint where the costs of an arbitration process could be avoided.
An important aspect to note for day to day dealings in the construction industry is that if a case ends up in arbitration, that clear records are absolutely vital. Max Abrahamson has a popular quotation in relation to construction industry claims as follows: “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”.
It is also clear that a strong case with a good degree of records and evidence presented to the respondents may lead to the claim getting settled at an early stage and may allow the avoidance of arbitration. It is therefore crucial for me in my current organization that we implement top quality record keeping on all our sites and we also ensure that these records are copied to our clients for signing. In order to encourage good record keeping, the personnel charged with keeping these records, normally carried out by a trainee Engineer or Site Clerk, are told of their possible future importance and value. The implementation of email and more recently the use of broadband enable more active monitoring and auditing of these site records.
History in the industry and the flaws of the traditional forms of Contract and thier associated unsatisfactory risk apportionment have resulted in the New GCCC Forms of Contract, with all its future challenges ahead of us. .
History is a fine teacher- I believe that an adversarial relationship between client and contractor will inevitably lead to more arbitrations and more cost. My earnest aspiration, for the Industry, is that we, clients and contractors will learn and develop through understanding and finding points of agreement, rather than perpetuating a combative history, which benefits no one, and costs many.
Perhaps the New Form of Contract is the starting line for us both.
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