SOLUTIONS LOOKING FORWORD

The shadow of uncertainty caused by Brexit continues in the UK with no forthcoming decision on whether the UK will leave the European Union with a deal, or at all. Consequently, the UK has seen delayed investment decisions resulting in fewer new projects; particularly in the private commercial sector.

Projects including High Speed 2 (HS2) and the Birmingham 2022 Commonwealth Games Village are still forecasted to start in 2019. However, the expected overall UK construction industry trend is a continued slowdown in the growth which has been experienced since mid-2018 (ONS).

We anticipate this will see contractors experience periods working below capacity and with increased competition for new works. As a result, commercial decisions are likely to be taken which may lead to potential disputes where differences arise. We recommend as a matter of good practice both employers, contractors and the supply chain implement collaborative long-term focused planning and relationship building seeking to avoid or mitigate any disputes which may arise.

The UK construction industry is continuing its transition into a digital age through the use of BIM and 4D/5D/6D Modeling. This is a good example of an effective risk allocation tool that could be implemented early in the process, allowing multi-party engagement for a collaborative resolution to difficulties which may arise.

In 2018, the Court of Appeal clarified the prevention principle confirming that party agreed exclusions will be upheld in relation to concurrent delay in North Midland Building Ltd v Cyden Homes Ltd [2018] EWCA Civ 1744. While the decision may be welcomed by employers seeking to include concurrent delay exclusions within their contracts, we expect contractors to continue to raise concurrent delay issues and expect disputes to continue to arise on this topic.

Finally, we predict the role of the Contract Administrator (or PM or Engineer) will continue to be in the spotlight during 2019. The trends experienced in our survey do not show any signs of this changing in the immediate future. We advocate the implementation of better training for those administering contracts in the UK construction industry in an effort to improve the avoidance of disputes arising.

In summary, the UK continues to be one of the leading jurisdictions for the resolution of disputes with low dispute values and quick resolution times, in comparison to the global averages. We hope to see the UK continue leading the way by encouraging parties to make use of effective avoidance and mitigation strategies for their disputes.

GUEST COMMENTARY

"It is unsurprising that the average value of construction disputes has decreased, as we see a move away from having large final account disputes at the end of a project. Parties are now generally preferring to try to resolve disputes as they arise contemporaneously during a project and/or to split disputes into more manageable bite sized chunks. It is not a sign, unfortunately, that the UK construction industry is becoming any less contentious. The drive to resolve disputes earlier is being supported by the drafters of the standard form contracts. Many of these contracts now contain elaborate provisions to ensure the early notification of claims and regimes that facilitate early discussion of them between the contracting parties. They also support rapid recourse to a third party neutral if their intervention is required. It is likely to be for this reason that the Arcadis report sees a reduction in the use of adjudications and an increase in negotiation as the preferred method of dispute resolution. As the report shows, however, this does mean that when claims cannot be resolved at an early stage, they end up being disputes that often then take longer to resolve. Parties become more entrenched and want to see a return on the investment that they have made in the proceedings. Given that many of the new editions of the standard form contracts are now considerably longer than their predecessors, it is concerning - but not surprising - that the report shows that a "failure to properly administer the contract" remains the primary cause of disputes. With margins continuing to be squeezed, and a perception that many tenders are still decided on the lowest price basis, it is difficult to see how this cause will be eradicated any time soon.

While the fact that the report shows that the UK is one of the leading jurisdictions for dispute resolution should be applauded, there is still clearly work to be done. There is scope for quicker, cheaper and more bespoke forms of dispute resolution, supported by more collaborative behavior, fairer risk sharing and a better understanding of how contracts are intended to be operated."

ADRIAN BELL 
Partner - CMS Cameron Mckenna Nabarro Olswang LLP (UK)