REUTERS | David Mercado

Prevention, not intervention – the rail sectors’ quest for dispute free delivery

For many in the construction industry there is a degree of inevitability that a commercial dispute will arise during the delivery of their project. It’s a view that has some substance as the industry is still seen as adversarial and divisive, with complex, protracted and costly disputes being something of the norm.

However, over the years UK construction has been encouraged to take steps to address its adversarial nature and collaborate. Calls for integrated approaches from the likes of Sir Michael Latham, Sir John Egan and Sir Roy McNulty, and more recent collaborative working principles defined through BS 11000 and ISO 44001, are all designed to reduce the propensity and corrosive consequences of disputes.

In parallel, less lofty routes that seek prompt resolution of disputes have developed and the industry has an established maturity and expertise in a range of early intervention and alternative dispute resolution techniques. However, given the unprecedented levels of investment, both private and public sector clients need to shift their focus from remedies and contractual defences to techniques that decrease the likelihood of disputes arising in the first place.

Put simply, the industry needs to better explore tangible techniques for dispute avoidance.

A changing of attitude

As the UK’s largest infrastructure client, Network Rail (NR) has a demanding £multi billion capital works programme delivering enhancements and renewals over a five-year “Control Period” from 2019 to 2024. The contractual regime for much of this work is via long term frameworks and collaborative forms of contract for which NR and its suppliers have built a credible capability.

In 2012, it became the first UK infrastructure client to secure BS 11000 certification and, in March 2017, one of the first six organisations from across the globe to secure accreditation to ISO 44001, the international standard for collaborative working.

As part of its collaborative leadership, Network Rail established the Commercial Directors’ Forum (CDF), an award winning approach to facilitate strategic engagement on commercial issues and drive industry change with its key suppliers and stakeholders. Over the past eight years the forum developed and deployed a number of industry changing initiatives including:

  • Improved payment terms of 21 days for its capital works rail supply chain.
  • The abolition of retentions across its capital works supply chain.
  • The deployment of a Rail Method of Measurement as the standardised commercial language for the cost planning, commercial management and benchmarking of rail works.
  • The publication of several industry best practice guidance notes.
  • The creation of a network of “high potential” practitioners called Tomorrows’ Talent Today, remitted to provide insight on the daily challenges faced by practitioners and validate CDF outputs to industry.

In 2016, the CDF turned its attention to the issue of disputes and how to reduce the risk of claims on the rail investment portfolio. Side-stepping the conventional approach of exploring early interventions or promoting “perfect practice”, it considered how potential disputes could be avoided in the first place.

Their answer was Dispute Avoidance Panels (DAP).

Spotting embers in the dry grass – prevention not intervention

The concept is simple. Establish a Dispute Avoidance Panel (DAP) comprising subject matter experts who understand the genesis of disputes and practical ways to avoid them. Their terms of reference: prevention rather than intervention.

The approach is the equivalent of establishing a seasoned team of expert fire fighters, all of whom understand what causes and sustains a fire. Their role is to be on “fire watch”, spotting the smouldering embers of a dispute in the dry grass and inviting others to take action to ensure a fire doesn’t start.

While straight-forward, the DAP concept has some complexities, the first being that dispute resolution experts are wired to provide opinions, intervene and seek resolution. DAP requires a more deft approach and structured observations, supported by recommendations.

In addition, while the model can demonstrate “good value for money”, identifying and valuing the costs and impact of disputes that haven’t or don’t arise is not without its challenges – proving the savings of what hasn’t happened is difficult.

Regardless, at its heart, DAP is about highlighting where the potential for a dispute is growing and inviting the projects’ leadership team to remove the key components that will nurture and ultimately give rise to a dispute – and that is a high value proposition that many a team would wish for when standing on the court’s steps.

What is the DAP process?

Specifically, the process is as follows:

  • For major programmes, frameworks or complex projects, the leadership team instructs the convening of a DAP.
  • The panel comprises three or four members with legal, commercial, technical and behavioural expertise, one of whom is designated as the chairperson.
  • A pre-read pack of standard project documents is then issued to the DAP members in advance of a planned visit to the team and, if appropriate, site(s).
  • The members review the contract, procedures and protocols, current progress reports and other material deemed relevant.
  • The members then visit the project pre-determined dates and undertake confidential yet open discussions with practitioners, managers and the leadership team. These conversations seek to reveal cultural dispositions, contractual process and protocols, relationships, communications and clarity of contractual expectations.
  • Following this visit and having discussed the pre-read pack and what they’ve seen and heard on the day, the team produces an “Observations Report”, structured to show a triage on matters seen as having the potential to become a dispute.
  • The triage categorises the teams’ observations as either Critical, Essential or General reflecting their view of the propensity for the issues identified to result in a dispute.
  • Importantly, the DAP are prohibited from providing any opinions, commentary or proposed intervention on current or emerging issues of disagreement. To do so would involve taking a side, impacting their neutrality and perceived independence.
  • On receipt of the Observations Report, often supported by a presentation from the DAP team, the programme leadership team will decide on the response and any necessary action planning. It is critical that the leadership takes ownership.
  • The frequency of follow up reviews is then agreed with the programme leadership for ongoing DAP support, usually at intervals of 2 to 3 times per year.
  • The DAP’s cost are split equally between the parties to the contract.

Key aspects that make DAP work

There are a number of key aspects that make the DAP approach work:

  • NR is building a list of suitable experts and developing a taxi rank approach for their appointment to various DAPs.
  • The team is independent, providing a neutral view from individuals who have significant expertise and experience with no vested interest. This is key.
  • The process allows the team to offer insights and examples of good practice from other major projects.
  • The pre-read pack should comprise existing (and current) project material. Nothing needs to be created especially for the DAP team.
  • The DAP members’ approach is important and they need to be adept at getting the project team to speak openly and honestly. The context is one of providing expert guidance in light of peoples understanding, with no prospect of criticism or recrimination. It mustn’t be seen as an audit or peer review.
  • Receiving independent observations, even if some aspects are already known to the projects’ leadership team, has significant benefits, particularly if they are going to be shared across all tiers of the project team and stakeholders.
  • The process shines a light on issues relevant to the project’s success and, aside from facilitating an appropriate local action plan, is an effective way of providing pre-emptive lessons learned.

DAP observations: common themes and “hot-spots”

Network Rail has utilised the DAP process across a number of projects and gathered intelligence of common themes and “hot-spots” of potential disputes, which include:

  • Lack of awareness and  understanding of actual contractual terms and process.
  • Lack of “people/team” integration, particularly with traditional forms of contract.
  • A “custom and practice” approach to disallowable costs in lieu of adherence to contractual terms and process.
  • Lack of consistency/clarity of language within change order provisions, particularly where those provisions relate to the costs of rectification.
  • Interpretation and disparity in commercial expectations of the “actual cost” provisions in respect of design fees.
  • “Hidden” stresses in relationships and competing priorities with wider businesses resulting in a build-up of unresolved issues.
  • Poor contract knowledge and contract administration.
  • Poor communication and disconnects in management reporting.

Support and implementation

Following endorsement by NR and its supply chain at the CDF, the option to instruct a DAP has been incorporated into the contract Appendices in its CP6 framework contracts.

Other infrastructure clients are showing interest, including Highways England, who have started discussions with NR for a potential DAP pilot, as have the RICS and Transport for London (TfL), who support the concept and see it as a complementary to their own aspirations.

An industry looking for change – Conflict Avoidance Coalition (and Pledge)

Indeed NR is not alone in its commitment to change the attitude of the construction industry and its clear drive to develop avoidance techniques caught the eye of RICS, who invited it to be a steering board member of the Conflict Avoidance Coalition, a coalition that includes the RICS, ICE, RIBA, CIArb, DRBF, ICES, ICC (UK) and TfL.

The Coalition’s purpose is to support the development of a culture of collaboration and reduce the number of disputes and the damage that they cause to relationships, finances and reputations.

The Coalition has issued a conflict avoidance pledge, which invites organisations to adopt conflict avoidance and early intervention techniques into their projects. To date, over 130 organisations have signed the pledge, with many coming from NR’s CDF community.

The Coalition has also produced a toolkit, which provides information about a wide range of techniques to avoid, manage and resolve disputes, and to prevent small problems from escalating into big ones.

The Coalition enjoys the commitment and advocacy of leading professional organisations, employers and their supply chains, signalling a fertile environment for avoidance techniques to become an established approach in preventing disputes.

The industry needs mature and effective prevention techniques that are on a par with those used for early intervention and NR’ DAP sets out to be just that.

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