The 2021 HKA Crux Insight Report into lessons learnt from claims and disputes highlights a number of common global causes of engineering and construction claims.
The purpose of the report (according to its Foreword) is to offer:
actionable insight and suggestions to help owners, contractors and the supply chain navigate the risks and minimise or avoid the problems we highlight.
What are the causes?
The Report reviews the causes of disputes both globally and across regions. These are the recurring factors:
- change in scope
- contract interpretation (perhaps all that flicking through contracts for force majeure or epidemics?)
- failure of contract management or administration
- late design information
- incomplete or incorrect design.
Although World Commerce and Contracting data shows payment as a major cause of friction on projects, late payments is outside the Crux top 10. This is, perhaps, because some payment issues are resolved without appointing a claims consultant to assist.
Contract recommendations
I have distilled the contract lessons from the Report as those are most likely to be relevant to anyone reading my blog:
- Less haste on contract negotiation – otherwise you will not explore critial issues and risks properly
- Identify gaps in the contract and likely pitfalls early
- Manage risks up front by reviewing the contract before work starts on site
- Appoint good contract administrators who are aware of and understand the contract and its underlying principles (training helps)
- Adopt contracts such a NEC or partnering contracts to drive a culture change to better collaboration
- Clear drafting
- Minimise bespoke drafting to avoid ambiguity or interpretation issues, as well as make it easier to administer the contract
- Take a holistic view of the contract provisions, not a ‘sticking plaster’ approach
- Ensure all relevant individuals are familiar with – or ideally trained on – the contract terms (PS I can help with that)
- Use the contract processes for claims to resolve issues when the parties are still on good terms.
What should you do?
We can learn from the lessons of others. Huge cost and time consequences are apparent from the Report and there are suggestions for all regions on how to improve.
The essence is to read and understand your contracts, then use them as drafted.
