“Communication is key” say speakers at FIDIC joint venture webinar

14 Apr 2020

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The latest in FIDIC’s Covid-19 webinar series took place on Tuesday 14 April with an event focusing on joint venture contracts, writes FIDIC communications advisor Andy Walker. The webinar, the third in FIDIC’s series of online events responding to the coronavirus crisis, was attended by over 550 attendees and looked at how Covid-19 is impacting and putting additional strain and pressure on joint venture arrangements.

Chaired by FIDIC CEO Nelson Ogunshakin, webinar speakers included FIDIC board member Anthony Barry from Australia, Anthony Bouchard, president and chief operating officer of CDM Smith in the USA, Jafa Khan, head of legal, Middle East, Mott Macdonald Group, Rob Morson, partner, Pinsent Masons, South Africa and Husni Madi from the FIDIC contracts committee.

Introducing the webinar, FIDIC board member Anthony Barry said it was important in the current climate to work closely and communicate effectively with JV partners. “Important questions need to be addressed including whether various parties to the joint venture partnership can deliver on their commitments and these need to be addressed in an open due diligence discussion in the context of the challenges posed by Covid-19,” he said. This can be challenging when, given the current crisis, some companies are understandably focused on survival, but such an approach is essential, Barry said.

Pinsent Masons partner Rob Morson highlighted some of the issues that could arise in joint venture arrangements as a result of Covid-19. Collaboration was key he said and it was important for parties to have meaningful engagement with each other in these changed circumstances. Morson stressed that it was important that the current crisis was not used to change agreements for competitive advantage and it was crucial that parties should engage in open discussion.

Anthony Bouchard, president and chief operating officer of CDM Smith, said that firms will need to show clearly how Covid-19 has impacted on a cost and time basis on their contracts. Language in agreements is key as to whether relief can be sought on time and cost, he said, but communications between parties was crucial. Slow payment was likely to be an issue during the current crisis and it was important to ensure that invoices were submitted in a timely fashion, he said.

Bouchard also said it was also important to ensure that sub-contractors and other partners were being paid in JV contracts at the present time. As with other speakers, he said that open communications with clients was vital to navigate a way through the current challenges.

Jafa Khan, head of legal, Middle East at Mott Macdonald Group, said that the challenge with Covid-19 was the novel nature of an event that has affected the whole world and was leading to drastic reductions in revenue streams of all parties. “The solution cannot be to ‘leave risk where it falls’ on projects,” he said, because all parties are experiencing difficulties and a joint approach was needed. It was far better to open up a dialogue with the client to work out a solution about how projects can be completed. Clients may have to invest a bit more in the project to get it through the current difficulties, but ultimately this would be the most beneficial approach for all concerned, said Khan. Regarding payment, he said that timeframes might have to be extended to assist the client but “ultimately it’s better to be paid than not to be paid at all”.

Husni Madi from the FIDIC contracts committee talked about JV arrangements and governance structure under the FIDIC contracts and highlighted the important role of the project manager. The most difficult problem during the current circumstances could be challenges related to parties’ financial circumstances, up to and including bankruptcy. How parties deal with firms’ going bust at a time when cash flows are extremely tight was a massive challenge, he said. Most agreements do not provide clear-cut solutions to what are unprecedented circumstances and so dialogue with parties was more important than ever, Madi said.

Addressing a question from participants, Anthony Bouchard highlighted the urgent need for mitigation conversations with joint venture partners to try and achieve the earliest possible dialogue with a view to finding solutions to the challenges posed by the current crisis. Again and again during the webinar, the issue of engagement, communications, dialogue and open discussion between parties was highlighted over and above the particular contract terms. It’s clear that in the current crisis early and constructive discussions across the JV team was absolutely essential.

Another issue raised concerned the issue of alternative dispute resolution (ADR) and whether this was likely to increase as a result of the current crisis. Rob Morson said that he had no doubt that disputes would increase but he hoped that these would be resolved effectively and without too much cost and therefore ADR was an appropriate response.

Another questioner, clearly reflecting what many webinar participants were thinking, asked the panel what they thought the economic effects of the pandemic would be on the industry and what form would a recovery take. Would there be a U-shaped economic curve or a W-shaped one? Anthony Barry said that he thought there would be a partial recovery in economic fortunes, a U-shaped curve, but this would be heavily dependent on how governments organised their strategies to get people back to work. Anthony Bouchard also foresaw a U-shaped curve but stressed that any economic predictions were difficult.

All the speakers shared their extensive global experiences and offered help, guidance and information to the 550+ participants in the webinar. They also answered questions from those attending which were submitted in real time during the event.

Summing up the webinar, FIDIC board member Anthony Barry said that going forward it was crucial for FIDIC to discuss life after Covid-19 and what comes next for the industry. Businesses will look different, he said, as firms contemplate the changes they have experienced, including to the way that they work, and the industry landscape was likely to be different from what it currently looks like.

The next FIDIC webinar, which is on the subject of Consultancy Agreements and the role of Engineers within Projects during the COVID-19 pandemic, takes place on Thursday 16 April at 12 noon CET.

Click here to book your place on the event on consultancy agreements

Please click below to view a recording of the webinar.

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