Collaborative procurement has demonstrated a strong track record in dispute avoidance, but it is not possible to eliminate the possibility of disputes altogether. When a dispute arises, there are three ways to approach its resolution:
■ ' Preventative', by using active joint risk management to ensure that a problem does not escalate into a dispute, as considered in Section 7.4
■ 'Facilitative', by keeping dispute resolution within the control of the team members until they agree a solution, a system which can lead to mutual recognition of the underlying facts, mutual acceptance of a compromise and preservation of some future goodwill
■ 'Evaluative', by putting dispute resolution outside the control of the team and accepting a decision made by a third party, a system which is more likely to involve a winner and a loser, considerable expense and loss of future goodwill.
Potential disputes can be averted by a 'preventative' approach if a warning of an emerging problem is issued as soon as the problem arises, and if the warning is issued to the correct party on the understanding that notification will lead to timely decisions and actions. A collaborative team may achieve a 'preventative' approach through joint risk management but it will also need to consider 'facilitative' options in order to avoid the cost and damage of an 'evaluative' approach.
Example: The Arcadis Global Disputes Report 2020 found that 'The key [UK] focus from the survey responses relates to those administering the contracts, however, the second cause suggests contract obligations are drafted in a manner which makes it difficult for all parties to follow. Greater use of more collaborative standard forms of contracts, i.e. PPC 2000, TPC 2005 and FAC-1, might provide more confidence in project delivery. However, this can only really be driven by the owners and their representatives.' |
The collaborative options for a 'facilitative' approach include direct negotiation and Core Group agreement, in both cases triggered by early warning and dependent on using the shared knowledge built up through other collaborative procurement and contracting systems. When team members use a facilitative approach to resolve a dispute by direct negotiations, they need to agree how these direct negotiations will be undertaken, for example by means of:
■ 'Direct, good faith meetings' between 'senior executives nominated in the Contract Particulars (or if either is not available, a colleague of similar standing)', as provided for in JCT2016
■ Meetings between 'Senior Representatives' during an obligatory four-week period, as provided for in the NEC4 Alliance Contract
■ Meetings between named individuals in a 'Problem-Solving Hierarchy', as provided for in PPC2000.
A contractual communication system can ensure that a duty to warn applies to any potential problem and that it is linked to a negotiation process and/or to a Core Group or other decision-making group which can review the problem when notified. The success of early warning depends on team members overcoming their instinctive wish to remain silent, and instead recognising that early warning proposals can be acceptable to all parties and may serve their interests better than relying only on the enforcement of other contractual rights. It is not possible to define rigidly the circumstances in which an early warning should be given, and team members may try to use early warning as a means to seek contractual waivers or simply to cause a distraction. At worst this runs the risk of wasted time and can be discouraged by good project management and peer group pressure.
Example: On the Greenwich Council housing repairs and maintenance alliance, it was reported that ' Early Warning and Core Group systems encouraged collective resolution of problems: Greenwich Council suffered no claims under its collaborative contracts.' |
An early warning identifying a problem or potential dispute should be referred to a decision-making group such as Core Group considered in Section 7.3. The NEC4 contracts include an obligation to give early warning linked to meetings called by the project manager but do not state how those meetings reach decisions. The. FAC-1, TAC-1 and PPC2000 contracts include an obligation to give early warning linked to Core Group meetings, and they use consensus- based decisions as a means of resolving disputes 'unless all the Core Group members agree such course of action without a meeting'. There are no early warning provisions to assist dispute resolution under the JCT 2016 contracts.
Notification of a problem to the Core Group provides the basis for consultation and agreement with other interested parties. This is preferable to the notification of a problem only to the Client or project manager, which may lead to a private review process without consultation and may result in a unilateral decision that is not accepted by other team members.
Example: In a potential dispute on the Bewick Court tower block, arising from the insolvency of the cladding specialist, solutions were agreed as a result of: ■ Involvement of the client and project manager with the main contractor in early selection and appointment of the cladding specialist, creating clear cost information with which to analyse cost consequences of replacing that specialist ■ Early establishment of a communications strategy, utilising a Core Group and Early Warning for joint risk management ■ A clear role for the client participating in Core Group problem-solving activities. The cost consultant on the Bewick Court project commented that: 'We could have seen contractual claims against both the client and the contractor and worst of all a project not yet concluded, resulting in another cold winter for Bewick Court residents. Instead, the project finished on time and within its maximum price and the team remains firmly on speaking terms.' |