Part 1 of a series of commentaries on the construction and engineering sectors in celebration of 25 years of conflict resolution services by Hunter Consulting.
Even those with the best 2020 vision did not dare to contemplate the situation that we currently face.
How can anyone make provision for a two-month lockdown and significant ongoing restricted working practices in any line of business?
In the construction industry we have to engage closely with others whether that be in the actual construction process or in the procurement, management and administration of our projects.
With the potential restrictions on working practices required to manage the spread of Covid 19 we now face significant challenges ahead.
I, like many others, have faith that we will adapt to, and overcome, the challenges that we now face as an industry.
It seems to me that we now have much greater need to practice what we preach when it comes to communication and working together.
The RICS last year developed a conflict avoidance pledge, which we as a firm were happy to sign up to prior to the current circumstances. It aims to promote procedures to avoid conflict and many are now touting this as a positive method for addressing the issues that now face us.
Avoiding conflict is however only one part of the equation. Conflict can be avoided but sometimes it is simply thrust upon us and managing it when it occurs is a key element that needs to be considered.
I drafted the majority of this narrative before Covid 19 came upon us. Its very presence, and the impact that it has had, will inevitably cause conflicts to arise. It is our way of dealing with such issues that will define success or failure when we look back on the fallout from our current circumstances.
Drafting the final version of this article five weeks into a lockdown period I am surprised by how little will change in our line of work even whist we address the problems that will face our clients in the remainder of 2020 and beyond.
What do I mean by this?
When you have been involved in dispute resolution for as long as we have you start to learn a few home truths.
These often come about after parties involved in disputes have expended significant amounts of their resources both financially and in terms of management time seeking reparation or defending a difficult position.
The cost in terms of lost opportunity, damaged relationships, lingering resentment and financial pain often has an effect well after the dispute is finally resolved.
During 2019 there was conflicting information afoot in the industry regarding the prevalence of formal disputes.
The RICS data compiled to early 2019 suggesting that adjudication continues to increase.
The insurance industry data compiled to the end of 2019 which suggests that disputes being referred to insurers have dropped by 50%. That is a dramatic reduction.
Are we to believe that disputes are becoming less common or is it the case that ways are being found to stop matters becoming formal disputes?
My own experience is that the more recent data reflects current trends which suggests that there is more dialogue, compromise, and positive engagement. This leads to parties resolving, issues through pragmatism and communication.
Of course this was in the period before the current “new normal” brought about by the impact of lockdown and subsequent restrictions.
Our experience leads us to believe that the best solutions come about through robust communication and given that everyone is affected by the current circumstances the need for constructive dialogue influenced by clear assessments of respective positions is now more relevant than ever before.
So why should we talk more and fall out less?
The Construction Act has been around for over twenty years and was brought in to attempt to reduce damaging industry practises such as poor payment. It has been successful but it has also spawned a huge body of litigation over its interpretation.
However I do believe that we as an industry are growing tired of conflict, as parties to disputes are tired of having third parties foist a decision upon them that they find unpalatable.
Historically over 90% of commercial court actions settle before they get to court. Adjudication has led to a increase in decisions being issued by a third party but often both parties are unhappy with the decision of the adjudicator and usually for opposing reasons.
The most difficult discussion that I often have with clients and their legal advisors is how to obtain the services of a “good” adjudicator. But what is a good adjudicator? I think it’s the one who gets to an answer whereby both parties can use the outcome to move on positively. This does not always happen.
The panels maintained by nominating bodies contain many competent individuals. That does not always mean that in a nomination process both parties will get the best person to adjudicate the dispute between them. Often the appointed person is the first person available and they are not always best suited to the task in hand. As a result few like running the lottery of a nomination body but have little choice. This is not meant to be a criticism of the quality of adjudicators. The real issue is the human resistance to handing over control of your destiny to the decision of someone else.
We all know that adjudication is only temporarily binding but the decisions of adjudicator often have serious financial consequences and so adjudication is not without risk. It can when used properly help to resolve matters.
I have lost count of the number of times that parties settle on the steps of the court rather than face the prospect of taking a judge or tribunal through complex technical and disputed evidence.
In the last 25 years the longest dispute in which we were instructed took 11 years to settle. Two adjudications, three extensive arbitration hearings and two mediations led the parties to a commercial settlement at the same figure proposed at the outset but after 11 years of unrecoverable expenditure on both sides.
What the recent data is showing is that parties are avoiding disputes through discussion, negotiation and mediation all of which lead to compromise.
There is however a key element that is required to allow such a resolution process to take place. We believe that true solutions can only happen when the parties respective positions are articulated in a clear, precise and easily understood fashion.
This is why conflict avoidance, dispute boards, early neutral evaluation, assisted negotiation and many other forms of soft resolution techniques are in our view the future commercial reality for enlightened industry practitioners.
I often find as an adjudicator that a dispute comes before me because one party fails to accept its obligations or the other party has expectations way beyond their contractual entitlement.
The only point at which they come to understand this is upon reading the decision of a third party obtained at significant expense.
Much of the time this can and should be avoided through proper communication.
Mediation has taught us that disputes can be swiftly brought to a close through listening to and understanding the other side and looking at solutions that are mutually beneficial or at the least based upon compromise.
However effective mediation can be, it still needs the parties to equip the mediator with a concise and effective articulation of their position. That is, in our view, the key to success.
We have 25 years of experience of analysis, articulation and presentation of complex information. For every case where we have assisted in formal dispute resolution we have several more where, through early involvement, we have assisted the parties in a positive resolution without the need to call in the referee.
In our view, people working together are the best part of construction success. Such positive engagement has produced many fantastic building and engineering wonders over the years.
When things go wrong concerning time or money people stop working together and work against each other. That is when everyone suffers.
By working together we will resolve matters in a fraction of the time and cost if our aims can be aligned.
Professional input may still be required but lets do it in a positive way and as early in the process as possible.
Some of us have already learned that but despite the introduction of conflict avoidance processes through the development of contract forms such as NEC culminating with NEC4 the form of contract still needs to be understood and properly operated in order for the full benefits to be realised.
NEC has been around for years but many operators are still uncomfortable with the pro active working together approach it advocates.
Put simply people cause disputes. People can resolve them.
Now even more than ever constructive dialogue is the way forward because at every level of the construction process from the largest corporations to the self-employed construction operative we all have a common goal. If the corona virus is to teach us anything surely it is that through collective effort we can succeed.
In a number of on-going articles we aim to give you an insight into some problems we have encountered over the years and how you might learn from our experience in solving them.
