The construction industry is immense. It contributes around 10 per cent of the UK GDP, and employs over two million people in over 180,000 businesses. It is a complex and innately competitive industry, where many of its diverse participants maintain priorities which often do not align. The truth about the UK construction industry for many years is that complex inter-relationships and competing interests routinely creates discord between employers and their supply chains. When disagreements are not addressed early, and effectively, they inevitably turn into disputes.
Resolving disputes can be extremely slow and costly. The disputes themselves can also cause tremendous damage to commercial relationships and put brand reputations at risk. They are a major reason why projects fail to complete
on time and on budget.
The UK construction industry’s recovery from the 2008 financial crash has been slow and prospects are still precarious. The shape and timetable for Brexit is still unknown but it is inevitable that the UK, once outside the European Union, will rely heavily on the construction industry as a major contributor to the future success of the economy. Ensuring the industry is economically successful brings into sharp focus the need to improve the way participants manage their relationships and deal with differences of opinion.
Employers and contractors in UK rail and transport are at the head of a growing movement within the construction and engineering sector. This movement is fundamentally changing the way employers and contractors work and how they resolve disputes.
With support from professional and membership bodies such as RICS, ICE, CIArb, ICES, DRBF, RIBA and ICC, Transport for London (TfL) and Network Rail (NR) are creating a major shift in the culture of the construction industry, to make harmful and expensive disputes a rare occurrence. The key objectives of this coalition are to promote a more collaborative working culture in the UK construction space, help reduce legal spend in the industry and protect brand reputations, which would be at risk if businesses were to gain reputations for generating disputes with their suppliers, and/or not dealing with them effectively. Ultimately, the coalition aims to create a step change in the culture of the UK construction industry, away from combative and dispute-heavy business relationships to a more collaborative partnership approach.
The campaign presents some major challenges, including the necessity to eliminate the standard mindset that has existed in the industry for many years, and which encourages and perpetuates conflict.
Two key messages emanating from the coalition are: conflict situations should be avoided where possible and, where differences of opinion do arise, they should be dealt with early and effectively, ideally in the boardroom. The coalition has now embarked on a campaign to persuade employers, contractors and professionals working in the industry to signal their support for conflict avoidance by signing up to the “Conflict Avoidance Pledge” (www.rics.org/capledge).
The pledge, which will be formally launched in London in January 2018, has already been signed by leading employers and contractors, including TfL, Network Rail and many of their suppliers.
When an organisation or individual signs the pledge, it indicates they are committed to:
- Working proactively to avoid conflict and facilitating early resolution of potential disputes.
- Developing their capability in the early identification of potential disputes and in the use of conflict avoidance measures.
The strategies for collaborative working and improved conflict management, which have been adopted by TfL, Network Rail and many in their supply chains, is evidence of a sea change in the industry. Employers and contractors are increasingly adopting innovative methods to prevent conflict situations developing. When opinions diverge and before matters become irreconcilable, bespoke dispute resolution systems are being applied to tackle the developing issues early and cordially.
How TfL steers clear of conflict
In 2013, TfL was looking for a suitable form of alternative dispute resolution for use on its major Capital Delivery contracts, to resolve emerging issues before they turned into full disputes. TfL approached a number of professional bodies for advice. When no suitable process was found, RICS offered to work with TfL in developing one, and the Conflict Avoidance Process (CAP) was formed. The CAP not only enables issues to be resolved without the parties becoming combative, but actually promotes collaboration and trust to such an extent that it improves the ongoing client-supplier relationship.
Case study: Victoria station upgrade
This major upgrade is being delivered by one of TfL’s key delivery partners, Taylor Woodrow – BAM Nuttall JV (TWBN). An issue arose on the project relating to a difference in how the contract was interpreted, which led to a disagreement on TWBN’s entitlement to certain costs. Both the TfL and TWBN project teams agreed to work together in preparing a joint submission to the CAP. This enabled common ground to be established, and the disagreement was narrowed and focused to the root of the issue. This was achieved before the CAP was involved and this collaborative approach ensured that the CAP recommendation led to an outcome that was successfully accepted by both parties. This instance of CAP was extremely quick and provided exceptional value, with CAP costs amounting to just 0.2 per cent of value of the issue.