QUANTIFYING DAMAGES IN CONSTRUCTION DISPUTES
CD: Could you outline some of the dominant trends you have seen in construction disputes over the past 12 months or so? What kinds of issues are leading to conflict in this sector?
Johnston: I have seen a variety of construction disputes in the last 12 months, including termination-related claims, valuation of variations, and prolongation and disruption, among others. The kinds of issues that lead to the above claims include the following. First, inadequate understanding of the requirements of the tender documentation – sometimes due to inadequate tender periods – which may only become clear post contract as the design is developed. This can lead to unrealistic programmes and cost allowances at contract stage. Second, similarly, inadequate understanding of the details of employer to contractor risk transfer. Third, ineffective management of change on the project. Finally, employers and contractors having differing cultures and opposing goals. It may be beneficial for the employer to carry out a presentation to tenderers at the beginning of the tender period, to aid the tenderers’ understanding of the employer’s goals and requirements.
Osbaldeston: I have seen a lot more disputes coming from terminations this year. While this is not uncommon, especially in Middle Eastern projects, we are seeing this trend in other parts of the world now. Why is it a ‘trend’, who knows, because the reasons can vary. One reason may be the international fluctuations in the cost of labour and materials, which are often cited. Poor progress or non-compliance with a contractual provision are also cited, and have impacted on decisions in term maintenance contracts. I agree that time pressures cause assumptions to be made, resulting in tender errors. Often an inadequate tender period and a lack of understanding of employer and contractor objectives can be problematic. Additionally, poor quality tender documents generating uncertainty compounds these issues. A competitive single stage tendering process seems to have made a real comeback, versus two stage tendering.
Jan-Mar 2019 issue
Blackrock Expert Services