Legal disputes are a particularly hot topic for the construction industry in the current climate, which makes it more important than ever to be as prepared as possible. To explore how firms do that, we held a webinar discussing what causes disputes and how digital technology can help businesses reduce their risk and win disputes.
The webinar brought together expert opinions from Graham Brown, a partner at Cassells Brock & Blackwell LLP; May Winfield, an Associate Director at BuroHappold; Rob Horne, a partner at Osborne Clarke; and Vicki Reynolds, the Head of Digital at i3PT Certification.
The panel began by discussing the most common types of disputes they were seeing in the current marketplace. They agreed that the COVID-19 pandemic has played a key part in many legal proceedings, with common cases including the suspension of work due to construction workers not being available or not being able to get on-site, having reduced workforces, and delay, time and cost overruns.
But the pandemic isn’t the only source of disputes. As May Winfield added: “In the last few years, the biggest source of disputes is people not complying with contracts, be it not serving the right notices or not complying with contractual obligations. Often the obligations are quite vague and the understanding may differ, such as someone being asked to achieve BIM Level 2.”
How technology aids disputes
Many disputes, be they COVID-related or otherwise, could be greatly assisted by businesses understanding what technology they need to use and how it can help them. For example, BIM can give firms the insight they need to efficiently plan, design, construct and manage new buildings. But technological capabilities are rapidly evolving.
As Rob Horne said: “There’s been a huge increase in digital photography. An enormous amount of data can be gained through people on-site having smartphones to take pictures and file them in a central server or drone imagery. Integration is the key next step, whereby businesses integrate all the different bits of technology. But at the moment, too many businesses have a disparate approach that could be a real danger over the next few years.”
However, as Vicki Reynolds pointed out, businesses must use technology to solve a problem rather than simply using it for the sake of it. Vicki said: “When we talk about technology it’s important that we embed the idea of good data and information management. The technology we need to deliver these projects already exists in other industries. So all we need to do to implement them is to better understand the way we link that information and the way we create open information in a secure manner. This means giving the right people the right time to make the right decisions.”
Insurers’ role in data sharing
A key issue related to this is the role of the insurance industry, which Rob Horne claimed was “even worse at using technology than the construction industry.” Insurance companies often tend to be focused on data around problems that have gone to litigation as opposed to risks in ongoing construction projects.
As Rob added: “Every construction business is on the verge of insolvency all the time and it takes so little to push them over the edge. No matter how big a business is, they’ll still get caught by insolvency if they’re not running their business correctly.
“For building owners and developers, particularly smaller ones, the insolvency of a business further up the chain can be business-critical. Insurance should step in and fill that gap to enable a project to complete but it’s too wedded to sitting behind professionals rather than constructors. Getting that shift to construction will be easier when insurers start using the technology and data that’s out there to properly forecast risk.”
Why are disputes happening?
The conversation moved on to the common causes of disputes in the construction industry, which May Winfield argued often boils down to a lack of clarity in contracts. “The more clarity people have, the more willing they will be,” May explained. “Putting it into a contract that people have to meet or talk to each other once a month or exchange information every two weeks may sound simplistic, but it forces them to collaborate and they realise it’s a better way of working.”
Graham Brown agreed that contracts were the industry’s biggest Achilles heel. “We’re dealing with an industry that has a pyramid of contracts, where people at the bottom don’t have privity of contracts with the people at the top, which always creates stress,” he explained. “You’re supplying services or materials for someone else’s benefit without being able to claim against them or communicate with them directly. So they don’t know whether they’re going to get paid or if there’s proper performance.
“It’s therefore vital to have a good system of contracts and invest more in the front end of a project. Being able to properly create and retain documents and then find them quickly is critical to avoiding disputes as time goes on. Spending more time on the front end and getting the perfect contract will avoid the dispute on the back end and be less expensive.”
How to make a good dispute case
The majority of construction disputes get settled before they escalate to the courtroom. But it’s important for businesses to understand what resources or information they need to minimise costs.
As May Winfield explains: “To prevent time and money being spent, you need to have the right records about what was agreed and when. You also need to have the right mindset to openly negotiate and appreciate that no-one really wins and it’s about finding what works best for both sides.
“On a wider scale, businesses need to use the right technology to compile records and, as soon as you have a dispute, compile what you need to put together evidence. For example, emails and 4D models to visually show how and where things started to go wrong can be really powerful.”
The panel agreed that document creation and discovery play a key role in preparing businesses for legal disputes. Graham Brown explained that lawyers’ use of eDiscovery makes having the right documentation from clients vital to efficiently and quickly presenting and winning a case. It’s therefore vital that businesses can access all historic information from a project, including emails and documents sent and stored by former employees.
Graham continued: “Once you have the contract, the in-house team needs to sit down with the on-site team to discuss how they will meet critical deadlines and how they’re going to paper their trail with a central filing location. That will help them not only be ready to respond to the five-day adjudication notice but also if they end up in a dispute situation then they’re in a position to quickly pull the document and say ‘are we really going to do this or is there a better resolution to be had on a business basis?’”
Having technology in place to correctly file information protects businesses and ensures happier employees. However, simply having the technology will not suffice given the huge volume of documents and data now being created.
Rob Horne quantified this by stating: “Even a modest case, say a £10 million dispute, can easily generate one million documents and there’s no physical way that anyone can read them to work out what really happened on the project. If you haven’t managed the documents or ensured they’re properly tracked with the right keywords then you create an enormous problem for yourself later on. A lot of lawyer cost is spent on tracking down the documents from huge data dumps of information. So businesses need to be better geared up to be able to decipher huge quantities of information.”
While Vicki Reynolds explained data that is easily discoverable is just as important. “It’s also about having the right information within documents, and having structured data that ensures that information is findable,” she said. “The more you structure data by following industry classifications and having a common practice in place across your projects, the better and more easily discoverable it will be.”
Practical steps to avoiding future disputes
Avoiding disputes is largely reliant on businesses putting clear processes in place and deploying the right technology. As May Winfield advises: “Get your records in order by ensuring documents and emails are stored in a central system, documents are named in the correct way and having a proper internal process. Then if there is a problem then you can pull up the correct data to work out what the issue is.
“All too often, businesses still start work before they have anything in writing about what they’re doing, what they’re doing it for, what they’re responsible for and for how long, and who else is potentially liable. This all goes back to the basic question ‘if you had a dispute tomorrow could you explain to your boss who did what, when, and how, and who’s responsible for it?’”
Furthermore, while technology is important to preparing for disputes, the role of people must not be forgotten. As Rob Horne explains: “The power of the machine is in the analysis of data to provide options and help people to make informed business decisions about what they do in the future.”