Identifying Risk and Resolving Issues Early
Given the difficult economic backdrop, it is natural that construction industry players are more attuned to risk and the possibility of conflict and disputes in construction projects. Our study demonstrates a growing use of internal legal, contract management or external counsel at the outset of construction projects to identify and mitigate risk. Businesses that ’always’ or ’often’ seek legal and contract management assistance at the start of projects has risen to 60% in 2022 from 51% in 2021.
For fixed-price contracts especially, this approach helps to sustain project viability. Consistently spending small amounts on legal advice during the course of a project is also prudent, with 88% of our respondents indicating that this is their preferred approach, compared to 76% in 2021.
Of course, operational construction projects are rarely straightforward with unexpected events being part of the territory, particularly over the last three years. Points of conflict, tension or dispute frequently arise, but it is imperative for project stakeholders to maintain productive business relationships. It can be a delicate issue, but leaving disputes unresolved until the end of the project can be hugely counterproductive. A sizeable 81% of our respondents believe that ’always’ or ’often’ resolving issues separately during the course of the project is a judicious approach, as opposed to addressing them at the end of a project. The brutal current market conditions are also pushing project parties to address tensions earlier.
"We are getting more inquiries and more instructions from people during the course of the project, particularly the really large infrastructure projects that are on things like lump-sum fixed prices. I think it's just much more pronounced at the moment, because the issues are more severe, so I think there is really no alternative but to start dealing with them proactively during the course of the project."
Adrian Bell, Co-head of the Infrastructure, Construction and Energy (ICE) Disputes Group
While some non-legal professionals might still be wary of addressing conflict points during a project due to concerns about damaging ongoing working relationships, Fritha Wheeler-Ozanne, Senior Counsel at Fluor Corporation, warns:
“I think sometimes it's a case of not rocking the boat, that we've got a good relationship, we're getting things done and everyone's happy. So why would we risk having a difficult conversation? But if you leave it to the end, people then move on to different projects and it can be a lot less effective.”
Fritha Wheeler-Ozanne, Senior Counsel at Fluor Corporation
