Blake Newport: Article 3 - Commercial systems and processes at project commencement

Posted on 26 July 2024

Introduction

In this series of 8 articles, Blake Newport sets out good practice and provides the benefit of 40 years’ expertise in supporting our clients negotiate the commercial contract minefield across all construction sectors in the UK and overseas.

In the third article in the series, Blake Newport considers some of the systems and processes that should be put in place at the start of a renewables project to manage the key elements of a project that most often lead to disputes.

Setting up and briefing the team

Just as houses and businesses need to be built on sound foundations, so does the delivery of a renewables construction project. Disputes can often be traced back to the early stages of a project so it is essential to brief the project team clearly and as early as possible to give them the best chance of avoiding disputes. It is common, however, for projects to commence on site with only part of the intended team available; arrival of individuals is often delayed due to their finishing other projects; senior staff have yet to be relieved of wider responsibilities; team members may be new to the company and younger colleagues may be taking their first steps up to greater responsibility. Identification of critical tasks early in the programme and assigning of responsibility to individuals to deliver them is, therefore, crucial.

The initial project team needs to be briefed on what needs to be done, by when and by whom. It is also essential to be clear about what tasks cannot be carried out immediately, why this is the case and what the consequences are of not doing so. Only then can the project team make informed decisions and put robust plans in place that will form the foundations for the rest of the project.

At the start of a project there are likely to be many competing demands placed upon the project team. Understanding the consequences of failing to achieve a key task is, therefore, central to avoiding a dispute. Consequences most likely to result in a dispute arise from failure to maintain the programme (delay), failure to comply with the contract and differences over whether elements of work are additional to or form part of the base scope. Failing to comply with the contract can take many forms, the most common being non-compliant works and defects, failure to provide notices leading to loss of entitlement and failure to comply with payment procedures leading to payment disputes.

Each member of the team must be aware of the contract and its requirements. The entire team does not need to know or understand the entirety of the contract, but they must know and understand those parts of it that are directly pertinent to their role and the tasks assigned to them. 

The ability to avoid a dispute is greatly improved if the team knows that it is in delay or is non-compliant with the contract, as it can then act to address these things accordingly.

Change control

It is common for larger companies to have a change control procedure but it is just as important for smaller companies to consider how they intend to manage change. Managing change is often seen as a concern that needs to be addressed once the works are underway. However, explaining and implementing a change control procedure is as important at the start of a project as it is midway through it.  Contracts such as FIDIC and NEC4 for example contain very prescriptive procedures, particularly with respect to change, which need to be adhered to from the very beginning of a project. It should also be noted that even if a larger company has an established change control procedure, it will probably still need to be adapted to respond to the specific change-related requirements of the contract.

It is not uncommon for the catalyst of a dispute to be a change that occurred early in the works which was not identified. Often a project team receives construction drawings and specifications issued by the designer at the start of a project without firstly checking whether there have been changes when compared to the contract drawings and specifications. Such a failure to check may be because of an assumption that being so early in the project it is unlikely that there are any changes. However, there may have been a significant period between the tender and construction drawings being produced.  Alternatively, it is sometimes assumed by the team that changes do not affect the works currently being carried out and can be addressed at a later date, with them being overlooked as a consequence. It is common for contracts to have time bars on how long a contractor has to notify and or make a claim for changes.

Being aware of change and having a process and system to deal with it from the outset is a key tool for avoiding disputes.

Recently Blake Newport was appointed by a subcontractor who had signed up to a heavily amended and prescriptive contract for an offshore wind project. Blake Newport supplemented the Subcontractor’s commercial team to ensure it properly understood its entitlement to change under the contract and that such changes were properly notified in accordance with the contract to protect the subcontractor’s entitlement.

Project team changes

Blake Newport’s previous last article touched upon the importance of the knowledge sharing that occurs as a project transitions from the bid team to the delivery team. This is equally true for briefing colleagues who join the team later in the project and as the team changes over time. Handovers from departing team members to new arrivals, ensuring that briefings are current, rather than the same as those provided at the start of the job are fundamental to ensuring that knowledge is not lost.

However, projects do evolve, teams change, and non-compliances and failures occur. That is the nature of construction projects, And avoiding disputes is all about how you respond to those events. In such circumstances, acknowledging that help is required, knowing who has the experience and ability to assist and asking for support to address a problem early is often the difference between a difficult situation being managed and resolved and one which escalates into a dispute. Establish early on during a project how you want to react to such problems and communicate to everyone who it is that they can ask for help from and how to contact them.

Should you wish to discuss any of the matters discussed in this article or any other commercial or contractual issues please contact James Knox (jknox@blakenewport.co.uk).