Concentrate on Dispute Avoidance, not a pitched battle, says Trett Consulting director Richard Swan
In mid-October, NCE reported on Constructing Excellence’s latest report Never Waste a Good Crisis and its finding that the construction industry had failed to fully implement the recommendations in the Egan report to improve risk sharing and cost and time certainty. The economic downturn seems to have led to excessive tendering, selection of lowest prices, deliberate under-bidding to secure work and the consequences of further disputes. Oh dear…back to the old days, I guess.
The increased potential of disputes should have dispute resolution specialists confident at the prospect of increased turnover and profits. I can hear you say: “Why should we pay these organisations from our paltry profits to assist in securing the money we are due? Surely we can row our own boat?” There are some organisations that are averse to using claims consultants, but many simply cannot “row their own boat”.
Conversely, others are deliberately making provision for claims consultants in their budgets. Does this demonstrate a view that disputes are likely, or is this merely commercial sense? Is this not contrary to the Egan/Latham intent?
Despite what may appear to be opportunities for disputes specialists, they too are suffering lean times and some have had to make sweeping resource cuts. Despite reports of more disputes, there is an increasing trend of keeping them under wraps, at least for the time being. Is this as a result of denial, or is it because there is no way of funding the fight? Either way, it’s not good news. Boards of directors and shareholders dislike legacy issues and uncertainty. Just deal with the situation promptly, fund it as a project in its own right, structure its resolution properly, and move on. Find the money from somewhere and seek advice if you need to.
Dispute Avoidance − that’s the future. And guess what? Claims consultants really do have much experience in that too. They employ experts who have been in the industry a long time and have had experience working for developers, employers, consultants and contractors.
Grey hairs and brains, someone keeps reminding me. The construction industry must take a braver step and adopt more of a “Spend to Save” attitude. It doesn’t cost millions and it will certainly be cheaper than dispute resolution. If the industry contemplates that disputes are inevitable and are providing for these in budgets, why can it not channel those funds into well-structured and cost effective dispute avoidance?
So what needs to be done? Getting the contract and its component parts right is a good start. Correct selection of contract, development of tender strategies, planning and programming, resource allocation, effective cost engineering and risk management must be high on the agenda. As the project develops, consider progress monitoring, budget reallocations, rescheduling, and effective change control. It’s not difficult, but it does require investment.
If used effectively, the “Spend to Save” strategy really does work. And if it all goes wrong, there are some very good consultants out there to help you. But they would rather help you get it right first time to save money than be labelled as claims consultants to recover it later.
- Richard Swan is a director of Trett Consulting and is currently deputy chairman of The Academy of Experts.