BWL Legal discuss the risk of disputes in construction
The Bank of England reported in November 2022 that the UK economy stands to enter a prolonged period of recession. This news arrived against the backdrop of reduced government capital spending, the lasting financial impacts of COVID-19 and Brexit, and ongoing generalised labour and materials shortages.
Historically, the consequences of hardening market conditions have been associated with increased disputes across the construction industry. Recent evidence suggests that this will be the case again, with industry reviews indicating a recent increase following the pandemic.
The cost to a business of resolving a dispute is not only financial. Dispute resolution demands time and effort, and often stands to damage existing working relationships with clients and other contractors.
Causes of Disputes
The Arcadis Global Construction Disputes 2022 report found that the three leading causes of disputes in Construction in the UK are:
- Errors or omissions in the contract document
- The owner/client, contractor or subcontractor failing to understand or comply with contractual obligations
- Poorly drafted, incomplete, or unsubstantiated claims
These factors can be categorised as administrative issues. Effective leadership often removes the root of the issues which lead to disputes. Instilling the right behaviours as part of corporate culture and taking a collaborative approach to contract management both help to identify and resolve issues at the early stages of the project life cycle and facilitate compromise between two parties to reduce the risk of issues escalating further. The right leadership within an organisation also clarifies the relationship between contracts and people, leading to better relationships and reduced risk.
Errors or ambiguity in the contract language can be identified and mitigated early in the project life cycle and often during the tender stage. Allocating the correct time to review and understand the contract is critical to ensuring that all parties are aware of their obligations under the contract terms and avoiding disputes down the line. The process should include a full and comprehensive review of the contract and schedules, the specification, the tender documentation, and any appendices and supporting information provided by the client.
Open, structured, and unambiguous negotiation between the client and the contractor is essential to avoid pitfalls during the contract that can lead to adversarial stances and the potential for disputes. Good practices include engaging early to identify and agree on obligations, willingness to compromise, and recording agreed resolutions. This also includes allocating risks appropriately down the supply chain through collaborative early engagement.
The leading cause Arcadis noted in their report was poorly drafted, incomplete, or unsubstantiated claims. Comprehensively recording events and activities, including photographs, dates and times of conversations, and appropriate signatures on key forms build a clear picture of how the contract has been managed, what arrangements have been agreed upon, and the source of any issues should they arise. Using this approach means that problems can be identified before they have time to become a dispute, or at least the documented evidence is available should a claim need to be
Our expert Solicitors are here to support you
At BWL, we can assist you with any construction dispute or adjudication. Our team includes expert solicitors, adjudicators, and mediators who can guide you on the best approach to bringing your matter to a swift and cost-effective solution. To discuss your matter with one of our experienced solicitors, please contact +44(0)121 387 9842, or email enquiries@bwlgroup.co.uk.