Reflections on Construction in 2020
To say that 2020 has been an unusual year would be an understatement. Not just for the construction industry, but for all of us around the world. Despite the challenges, things are not entirely doom and gloom. We have all learned in one way or another from the COVID-19 experience. Sometimes we need a challenge to force us to think about alternative ways of doing things.
FIDIC Amendments and The Golden Principles
We have all seen it. We receive what we assume is a FIDIC form of contract. But when we examine its contents or the Particular Conditions, we find it has been subject to amendments and changed considerably. FIDIC amendments we often see include:
- Clauses struck out, usually those that give the contractor rights and remedies.
- New clauses appear which are often punitive toward the contractor.
- The remeasurable Red Book changes to a lump-sum contract.
- Time-frames may have been reduced for the Contractor’s actions and extended. Alternatively, time-frames vanish altogether for the Engineer and Employer’s obligations.
Added to this, the changes and amendments are often poorly drafted and the final version contains ambiguities and conflicts.
So what we end up with is not what FIDIC intended. In short, it does not do what it says on the tin.
Employers and Engineer’s make these changes in an attempt toRead more
Construction and Contract News 2019
We are looking ahead to 2020 and back on the past year. What has changed and what should we be looking out for in the world of construction contract and claims? We take a look in this round-up of construction and contract news from around the world…
The Engineer's Responses and Determinations: What Should be Included?
Earlier this year, I presented a CPD talk to RICS members in Dubai on the topic of Engineer’s Responses and Determinations. I usually like to kick things off with a poll, and I asked the group the following questions:
- How many people have experienced a situation where the Engineer does not respond to a claim within the contractual time frame? Almost everyone confirmed that they had.
- How many people have experienced a situation where the Engineer’s response has done little to resolve the claim? Again, almost everyone confirmed that they had.
- How many people have experienced a situation where the Engineer’s response has caused the matter to escalate to a dispute? Over 50% of attendees confirmed that they had.
- How many think that failures of the Engineer to carry out their contractual obligations on claims are helpful to projects? No one thought that this helped projects.
This is clear feedback from RICS members that Engineers often do not perform their obligations, which has a detrimental effect on projects.
So, what should Engineers be doing to help projects when responding to claims? Well, as usual, the contract provides the answers, so let’s have a look at what the FIDIC Red Book has to say on the subject.
FIDIC Sub-Clause 20.1 (Contractor’s Claims)
This requires the Engineer to respond within 42 days of receipt of the claim. The response may be acceptance in full, rejection, or presumably acceptance with a reduced quantum. The Engineer can request further information if it is not possible to reach a conclusion from the information included in the claim. However, if they do so, the Engineer shall respond on the principles of the claim. If rejecting (or reducing the quantum), the response shall contain ‘detailed comments’.
FIDIC Sub-Clause 1.3 (Communications)
This clause states that ‘Approvals, certificates, consents, and determinations shall not be unreasonably withheld or delayed’. This reinforces the provisions of Sub-Clause 20.1 (Contractor’s Claims) to respond within 42 days.
Why does FIDIC place such importance on the response time?
- Establishes a revised Time for Completion (or not).
- Prevents the deduction of delay penalties (or not).
- Allows the Contractor to be paid for Costs legitimately incurred.
- Allows the Contractor to be paid for work carried out which is the subject of a claim.
- Reduces disputes.
- This all promotes goodwill and cooperation.
Sub-Clause 3.5 (Determinations)
This clause provides that the Engineer shall consult with each Party and endeavor to reach an agreement. If an agreement is not achieved, the Engineer must make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances. In either case, the Engineer must give notice to both Parties with supporting particulars.
FIDIC Sub-Clause 3.1 (Engineer’s Duty and Authority)
This states that ‘whenever carrying out duties… specified in… the Contract, the Engineer shall be deemed to act for the Employer’. Does this mean that the Engineer is obliged to defend the Employer’s position by not making ‘a fair determination in accordance with the Contract, taking due regard of all relevant circumstances’? I think not, and neither did the RICS attendees.
So, what should an Engineer include in their Response or Determination to comply with the Contract?
Sub-Clause 20.1 (Contractor’s Claims) directs the Engineer to: ‘…respond with approval, or with disapproval and detailed comments. They may also request any necessary further particulars but shall nevertheless give their response on the principles of the claim…’.
Under Sub-Clause 3.5 (Determinations), the Engineer is obliged to “make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances.”
The Engineer therefore has an implicit obligation to demonstrate to both the Employer and the Contractor that the response or determination is fair and reasonable and in accordance with the Contract. They should also demonstrate that if either party chooses to escalate the matter to a dispute, they will ultimately fail. The Engineer’s response must therefore be a comprehensive document that clearly sets out the findings and includes the same criteria as a claim:
- Examination of the cause.
- Analysis of the effect and linkage to the cause.
- Examination of the final effect on the Time for Completion with explanations.
- Calculations of the additional payment with explanations.
- Examination of the contractual entitlement.
- Substantiation of all the above.
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How to Ensure you Avoid Costly and Time-Consuming Disputes on your Projects
We all want to avoid disputes on our construction projects. But it seems we fail to learn from lessons of the past. ARCADIS have just published their annual Global Construction Disputes Report 2019. It makes interesting, but, not altogether surprising reading.
This year, the top three reasons for disputes are:
- Owner/Contractor/Subcontractor failing to understand and/or comply with its contractual obligations;
- Errors and/or omissions in the contract document;
- Failure to properly administer the contract.
Some other interesting noteworthy observations are:Read more
Inadequately Expressed Claims: the second most frequent reason for disputes
ARCADIS have recently published their Global Construction Dispute Report 2018 and unsurprisingly “Poorly drafted or incomplete/unsubstantiated claims” is reported as the second most frequent reason for disputes. This annual report has consistently ranked the same reason highly for several years, so it seems that the industry is not learning the fact that the onus is on the claimant to properly prove his case and that failure to do so will be costly and time-consuming.Read more
Crisis for Gulf Construction Companies?
Let's take a look at what has been happening in the Gulf construction market recently.Read more
6 Key Actions UAE Contractors Should Take in Today's Tough Market
UAE contractors are facing tough market conditions, with cash flow constraints and greater competition for fewer contracts placing a squeeze on margins. Expo 2020 is just around the corner now but much of the anticipated bonanza from Expo and related projects has yet to kick off. The region however still offers decent long-term fundamentals for companies prepared to ride out the current slowdown in the market.Read more
Insights on the Construction Industry in Singapore
I have just returned from Singapore where I presented our Claims Class 2-Day Intensive Training Course on construction claims to a group of 29 construction professionals from all sectors of the industry.Read more
Can Artificial Intelligence Perform the Role of a Construction Planner?
It seems stories and articles about artificial intelligence are everywhere you look at the moment. A common question is whether AI can eventually replace a human’s job completely.
This got me thinking about how AI might feature in construction. Will it start to replace people in projects? As a project planner, I wonder, will a computer ever be able to do my job?
The construction industry continues to evolve, but it can still be slow to embrace new technology. Construction planning is complex and multifaceted. Tasks can include project management, allocation of resources, risk, and programme scheduling.
Given this, I don’t think robots will be replacing us anytime soon. However, in this article, I discuss how AI could assume the role and responsibilities of a construction planner. Might there be advantages to AI taking over the planning function of projects?
Advantages of AI in construction planning
Automating tasks
Artificial intelligence can process large amounts of data at a faster rate than humans. This means it can automate and speed up time-consuming tasks. By analysing resource requirements for a project, AI could generate schedules, optimise monthly workflow, and produce monthly reports. Of course, we should base these processes on the information inputted. So, we wouldn’t be rid of human involvement just yet. However, if AI were to perform these tasks human planners could focus on problem-solving and decision-making.
Risk Mitigation
Construction projects are inherently risky. Delays, cost increases and overruns are not unusual. AI could help identify all of these risks. If AI could review historical data and simulate several scenarios, this could provide early warnings and mitigation strategies. Having this type of data could increase the success rate of projects.
Disadvantages of AI in construction planning
Human Judgement
AI makes decisions by analysing the data available and choosing the one with the best chance of success statistically. Where it struggles is making judgements around unforeseen events. Human intervention is still required to validate and interpret what AI generates, at least for now. Planning requires making considered decisions. In my view, only human judgement can make these decisions. AI is not there in its latest form, but who knows in the future? But for now, AI lacks the ability to predict a lot of changes. From adjustments in design to delays due to personal issues, there are some things a computer can't know.
Records and Data Quality
AI is heavily reliant on data. It needs quality records to produce an accurate analysis and make correct decisions. It is well-known that in the construction industry, record keeping is inconsistent. For AI to work, our data input and record-keeping need to vastly improve.
Changes in Environments
Construction projects are subject to frequent changes. Design changes, unforeseen weather events, changes in resources, events that occur on-site and emergencies are all common. AI needs to have the ability to react quickly to these events and to remain effective. AI needs to handle real-time data and adjust accordingly. This data also needs a way of being inputted into the AI system.
Conclusion
Artificial intelligence shows great potential in being able to improve the role of a construction planner. However, it is not ready or capable of replacing human judgement and expertise in this role - at least in its current forms. The use of AI in construction planning could help mitigate risks, enhance efficiency, and provide valuable insights. This will be an interesting area of development over the coming years.
In my opinion, a construction project still needs planners today and will for a while. Planners make difficult judgments, take stakeholder preferences into account, and adjust to rapidly changing project environments. On a building site, AI is incapable of negotiating and engaging with other humans, at least for now. But we may see AI playing a supporting role in construction planning very soon.
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