You are viewing 1 of your 1 free articles
Major construction disputes often come down to the same small issues
Embarking on long-term building programmes will be part of many registered providers’ strategies over the coming years. But such projects are not without risk or problems, writes Richard Anderson
As recently reported in Inside Housing, a culmination of fire safety and remediation works, challenges with the supply of materials and labour, the need to adapt to the decarbonisation agenda and the Future Homes Standard are slowing the acceleration of building programmes across the sector.
Yet with the £7.1bn National Home Building Fund alongside the £12.2bn put aside for the Affordable Homes Programme, many are looking to the sector to drive a construction boom to help the UK move out of the coronavirus pandemic and towards economic recovery.
Major building programmes often come with a great deal of complexity, so bumps along the road are not unexpected. Most projects will complete without incident, but for an unfortunate minority, a dispute will arise that could knock the build programme completely off course, with no end in sight.
The end result is often costly, could turn otherwise cordial relationships sour and damage reputations in the process.
Having worked on thousands of construction disputes across many sectors, it’s amazing how often I see the same small number of issues to blame.
Naturally all parties start off with the best intentions, and (hopefully) with a contract in place, they think that any dispute can be avoided. Think again. It is at the contract stage that almost all of the problems I typically see could have been prevented.
READ MORE
For housing associations, the contract stage is a key part of the build and is the best opportunity they have for creating the right outcomes.
Too many organisations fail to outline in detail what they expect at the outset, only to find that seemingly innocuous changes down the line turn out to be contentious and costly.
“It is essential to describe and agree the specification in detail at the outset. It is far easier to have a disagreement then than on day 240”
Accept that some changes along the way are inevitable, but ensure there is a mechanism for a variation in your contract as to how to handle such changes. More importantly, ensure you know how to operate that mechanism properly.
It’s not unusual for a housing association to request what they see as some small alteration, perhaps a different type of window. But as a client, make sure you understand the ramifications of your change, no matter how small.
Too many times I have seen a client believing their ‘tweak’ to be minor and within scope, only to find it wasn’t. Often the contractor doesn’t want to upset the client and so they accommodate the change. Everyone is happy until the end of the project when the budget is tight and the bills start coming in.
Ask yourself this: do you know what £100 will buy you on the project you’re about to embark on?
The lesson here is about expectations of quality. Let’s say you set aside £100,000 for fixtures and fittings, rightly or wrongly think you’re getting the Rolls-Royce of products, when in fact the contractor is delivering what they see as the equivalent of a Honda. Could that mismatch have been addressed earlier?
It is essential to describe and agree the specification in detail at the outset. It is far easier to have a disagreement then than on day 240.
I was once brought in to resolve a dispute that arose where a client had specified a certain level of lighting in each room. The client’s expectation was that there would be some quite fancy halogen lighting in each room, when in fact the contractor saw that as simply making sure the walls were painted bright white and the carpet kept a light colour.
We all know that timescales slip, but when it comes to a dispute, it usually rests on where the fault lies. Did the contractor not do something or did you as the client not meet a certain deadline? Or was it both occurring at the same time that contributed to the delay?
Most building contracts require the contractor to complete the works by a specified date. If the contractor fails to do so, and unless the terms of the contract entitle it to claim an extension to the completion date, it will usually be liable to pay liquidated damages to the client.
Where, due to the absence of contractual provisions relating to the time for completion of the works, the client cannot insist on the contractor completing works by a specific contractual completion date, time is said to be ‘at large’. Time at large usually means that there is no enforceable date for completion and the contractor then only has an implied obligation to complete the works within a ‘reasonable time’. And what is reasonable to you, may look entirely different to your contractor.
“Remember that a contract is a living document. It is not for signing and filing. It should be there to guide the project along the way”
By a county mile, payment is the single biggest issue leading to a dispute.
The Housing Grants, Construction and Regeneration Act 1996 is intended to govern payments of construction programmes. It was amended in 2011 to close certain loopholes, such as failure to pay.
In addition to specifying that the dates for payments between the parties must be set out in the contract (or the act will imply dates), it also allows for the party seeking payment (the building contractor) to apply for payment and the paying party (the registered provider) has to assess that application within defined timescales or serve a payment or pay less notice if it intends not to pay the full amount.
Yet, as a registered provider, if you do not take these steps, the contractor is permitted by law to seek payment of the full amount applied for under adjudication, in what is now commonly termed as a ‘smash and grab’ adjudication. Typically, these adjudications are incredibly difficult to defend, meaning the registered provider pays now and has to argue later.
This leads me to my final point: deploy forensic project management.
Diarise everything. Every single payment, milestone, conversation and meeting.
Remember that a contract is a living document. It is not for signing and filing. It should be there to guide the project along the way, and those with decision-making ability for the build should frequently be reminded of its existence and what it says. It still amazes me how many sophisticated clients have not actually read and understood their contracts.
You might also consider appointing a professional project manager with experience of handling large-scale build programmes. Ideally appoint someone even before you’ve got to the contract negotiation stage as they will not only be able to guide these negotiations, ensuring the right provisions are made, they will also encourage you to think about your project objectives, which in turn can then be reflected in the contract.
Throughout the project, professional project managers can serve as your eyes and ears. And, in the unlikely event that things go wrong, you will may be able to make a claim against their professional indemnity insurance. It is an investment worth considering.
Richard Anderson, partner, Devonshires Solicitors
