Digital, disruption and dispute avoidance highlighted at contracts conference

15 Jul 2021

news image

The third and final day of the Official FIDIC Contract Users’ Conference (Asia and Australasia time zone event) on 15 July 2021 focused on a number of issues including how innovation, disruption and change are affecting future project delivery, especially in the technology area, the effects of the Covid-19 pandemic on construction disputes and also the important role of Dispute Avoidance and Adjudication Boards, writes FIDIC communications advisor Andy Walker.

The theme for day three of the event, which was delivered online by FIDIC, was Innovation and Disruption, where the changes are coming from. The conference, sponsored by FIDIC global strategic partner, international law firm CMS, was attended by multilateral development banks, private sector organisations and clients, government, engineers, contractors, investors, consultants, and many other stakeholders with an interest in FIDIC contracts.

In his opening remarks to delegates, FIDIC board member Sarwono Hardjomuljadi welcomed delegates to the event, highlighting the importance of innovation and technology. The first session on day three looked at how innovation disruption is affecting future project delivery in the technology area and was expertly chaired by FIDIC contracts committee vice-chair Kiri Parr from Australia.

The first speaker, Alan McNamara, project director of i-Contract Technologies, talked about his experience of researching the implementation of smart contracts within the construction and property sector, with particular regard to the development of the iContract concept for construction contracts. He highlighted some of the problems inherent in traditional contracts, which he said were typically a long contract negotiation process, onerous contract administration practices and security of payment behaviour all being played out against a background of a rising number of disputes that continue to plague the sector. “The goal of i-Contracts is to increasingly move to a totally automated situation for contracts,” said McNamara.

The i-Contract solution would mean better contract formulation and negotiation efficiency, improvements to contract administration efficiency through semi-automation, greater security of payment and ultimately reduced disputes, he said. McNamara then went on to outline the future plans for the i-Contract platform, which included developing the initial proof of concept and getting it established in the industry, further development towards automation through to full implementation using artificial intelligence (AI).

Continuing the AI theme, the next speaker Cuong Quang, general manager for innovation and technology at Octant AI, spoke about artificial intelligence and project delivery and updated delegates on case study research into whether machine learning can help to improve project delivery risk management by extending the benefits of an ‘outside view’ beyond planning, delving into the complexity of the project lifecycle and improving cost and time forecasts. The research revealed some interesting results including giving a four-month early warning of cost and time underruns and an 87% accuracy improvement in portfolio cost forecasts. These were significant findings, said Quang, showing that AI had a key role to play in projects going forward.

The final speaker in the first session, Fenwick Elliott partner Jeremy Glover, gave an update on the key and current contractual issues to consider around technology and data. BIM mandated more collaborative working in the industry, which was obviously a good thing, but Glover highlighted that “collaborative working requires parties to contracts to communicate and be transparent with each other”. This in turn, he said meant that the need for clearly defined responsibilities for key information deliverables, especially around data access and provision, was crucial.

Access to data was particularly important, Glover said. It was crucial to consider throughout the course of the project and afterwards issues like - who has the right to access a technology platform and whether this is affected by non-payment of fees? Will the platform exist in six to 12 years’ time? Who hosts or licenses the platform during the project and after? Is the data backed-up and/or extracted on completion of the project? These were all crucial questions that had to be considered when working with new technologies. “Make sure that all parties know what they are talking about, that you are using the same terms and descriptions and that there is clear understanding of who is doing what. Above all, take your lead from FIDIC and their Golden Principles and make sure that particular contract conditions are drafted clearly and unambiguously,” Glover urged delegates.

The second session looked at how Covid-19 has impacted the industry and the resultant dispute resolutions trends. Speaking on the impact of Covid19 on construction projects and how FIDIC contracts can support users, Kiri Parr highlighted in her usual clear and insightful way, the essential guidance memorandum document that FIDIC published to help users of the FIDIC standard forms during the pandemic. Parr said that the document was extremely well received and had proved to be a key help to the industry as it promoted (in line with FIDIC’s Golden Principles) cooperation and trust between contracting parties, do not support any party taking undue advantage of its bargaining power, discourage adversarial attitudes and encourage dispute avoidance and encouraging timely and adequate payment in accordance with the contract to maintain cashflow.

The next speaker, Jeremie Witt, a partner at international law firm CMS, looked at dispute resolution trends during Covid times. He said that since the pandemic emerged he had observed an initial apparent reluctance to commence disputes with a greater emphasis on parties seeking to negotiate and avoid formal disputes. There were also significant amounts of claims arising out of Covid-19-related delays and disruption, including due to lockdowns and movement restrictions, and an increased amount of parties seeking to reserve their position/rights. All this had led to the need for a greater emphasis on dispute avoidance against a background of arbitration cases on the rise worldwide, Witt said. He also outlined some of the types of claims commonly arising out of Covid-19, which he said included those related to force majeure, variations, change in law, price escalation and frustration. “We are also increasingly seeing heavily negotiated contractual provisions relating to Covid-19 and pandemics,” Witt reported.

Witt spoke approvingly about the use of dispute boards. He said that anecdotal evidence suggested that dispute boards are finding greater acceptance on complex projects. “My personal experience on a complex high-value project in the Middle East, including when Covid-19 caused significant disruption to the project, was that a sensibly run standing board - together with reasonable parties - helped navigate completion and handover of a very challenging project and successfully avoided disputes,” Witt said.

The last speaker in the Covid session was Salvador Castro, chairman of SPCastro and & Associates, who highlighted his experiences from the Philippines. He spoke about the disruption across the industry that had taken place due to Covid and highlighted the benefits of using FIDIC contracts to help deal with this disruption. Castro said that the FIDIC Covid-19 Guidance Memorandum was especially effective in providing independent expert guidance to stakeholders in arriving at balanced solutions to claims on extension of time issues and costs leading to an amicable settlement. “FIDIC contracts provided the protocol in addressing issues due to an exceptional event like the Covid-19 pandemic, which has led to unprecedented requests from Filipino stakeholders for FIDIC contracts training,” Castro said.

The final session of the conference, chaired by FIDIC contracts committee member Siobhan Fahey, looked at the key issue of Dispute Avoidance and Adjudication Boards (DAABs) and particularly how these boards were being run as standing boards. Fahey was the chair of the FIDIC task group that drafted the provisions of the FIDIC Rainbow suite and is a very strong advocate for the use of DABs and DAABs.

The first speaker Donald Charrett, arbitrator, mediator and dispute board member from Expert Determination Chambers, spoke about the application and management of the dispute board processes. He explained the background to dispute boards, DAABs under the  FIDIC contracts, Australian procedures for DABs, FIDIC procedures for DAABs and virtual dispute board procedures. He went on to discuss the success of dispute boards in Australia and specific Australian DAB procedures. “DAAB can play a key part in encouraging the participation of the parties and promote discussion during the project,” Charrett said. He also discussed the specifics of virtual dispute boards, a vital feature, especially during the Covid 19 pandemic. He highlighted the fact that the Dispute Resolution Board Foundation had prepared two useful documents to assist stakeholders when face-to-face meetings are not possible - Best Practice Guidelines for Virtual Dispute Board Proceedings and a Checklist for Dispute Board Members in Preparation for Virtual Dispute Board Proceedings.

FIDIC board member Sarwono Hardjomuljadi highlighted his experiences of some of the DAAB practices in Indonesia. He discussed the history and development of DAAB in Indonesia, outlined some specifics of local Indonesian law and the philosophy behind the laws in place. Hardjomuljadi also provided some useful insights from a recent study conducted around the industry’s reluctance to use DAABs and said that “trust” was a major concern and made the point that earning trust and respect were crucial to success factors for the wider use of DAABs.  

Rounding off the session, Toshihiko Omoto, a member of the FIDIC presidents list of adjudicators from Japan, gave an overview of dispute avoidance and dispute resolution, highlighting the origins of the basic concept of dispute boards, which were born in the 1970s in North America as a Dispute Resolution Board. He went on to explain the key factors for successful dispute boards, which he said included ensuring their establishment before construction begins or as early as possible. Integrity of DB members was crucial as was their ability to acquire respect from all parties including the engineer. As far as the composition of the members of the board were concerned, “nationality does not matter, integrity is the key,” said Omoto.

Closing the final session and the conference itself, FIDIC chief executive Dr Nelson Ogunshakin thanked all the speakers and attendees and the FIDIC contracts committee for their sterling efforts behind the scenes. He also thanked the conference strategic sponsor international law form CMS (https://cms.law/en/gbr/) for their support of the Official FIDIC Contract Users’ Conference series and ended by urging all delegates to continue the discussion at FIDIC’s Global Infrastructure Conference taking place on 10 and 13 September.

FIDIC would like to express its thanks to the conference strategic sponsor, international law form CMS, for their continued support of the Official FIDIC Contract Users’ Conference series.

Click here for more information on the FIDIC Global Infrastructure Conference on 10 and 13 September and to reserve a place.

Related news

FIDIC hosts first-ever online international infrastructure conference

11-Sep-2020

Conference spotlights Latin America’s experience of FIDIC contracts

27-May-2021

CEO's Update - Issue 8: July 2020

03-Jul-2020

Consultancy contracts webinar highlights engineer’s crucial role

16-Apr-2020