Equitas Consulting

Findings of the Construction Contracts and Law Report 2022 by RIBA

The Royal Institute of British Architects (RIBA) published its 2022 Construction Contracts and Law Report. This report can be read as an update to the NBS 2018 National Construction Contracts and Law Report which was carried out by the NBS between 2012 and 2018.

The report is based on the RIBA’s Construction Contracts and Law Survey 2022 and covers the main topic as; procurement methods and tendering, collaboration, sustainability, contracts and forms of appointment,  legal issues, disputes, and dispute resolution.

We believe that the report has some interesting findings given the broad scope it covers. But in this article, we are going to summarise the report’s findings generally in regard to contractual matters and disputes.

The respondents answered the most challenging legal matter within the last 12 months to have been  ‘administration of the contract’ (39%), ‘rules governing insurance and liability for risks’ (25%)
and ‘dispute resolution process (18%). About 26% mentioned ‘compliance with COVID regulations and guidance’.

When we look at what contracts the respondents were referring to, for projects valuing over £25 million 37% of the respondents cited the FIDIC Suite of Contracts, followed by the NEC Contracts, 26%.   The JCT and the RIBA Building Contracts mainly dominated the small to medium size project valuing between £50 thousand to £5 million.

60% cited Employer’s Variation as the primary reason impeding the construction progress within the last 12 months period. This finding concurs with EQUITAS’s contracts and claims management experience, particularly with regard to large civil engineering and infrastructure projects governed under the FIDIC suite of contracts.  We witness an upwards trend in design changes introduced after commencement and variations in type, quality, and quantity of work by Employers.

The report further suggests that disputes are common and affect a significant proportion of the
industry. Unsurprisingly 50% of respondents who were involved in dispute reported ‘extension of time’ as the most common cause, followed by ‘defective work’ (41%), ‘loss and expense’ (31%), ‘valuation of
the final account’ (30%) and ‘valuation of variations’ (26%).

63% of the dispute occurred during the currency of the works.

The most common method of dispute resolution included in contracts is adjudication (50%), followed by ‘negotiation at board/company level’ (34%), arbitration (30%), mediation (27%), ‘negotiation at site
level’ (25%), expert advice (15%) and using the services of the Dispute Adjudication Board (4%).
It should be noted that ‘adjudication’ represents the statutory adjudication in the UK,  introduced by the Housing Grants, Construction and Regeneration Act 1996 .

To summarise, the findings of the report are no surprise.

Extension of time is still one of the most debated subjects all over the industry. Delay is a natural part of any construction process.  It may be inevitable in cases, if not the project participants are late or reluctant in taking preventative measures in advance.

Contract documents providing insufficient information for planning and  programming,  unrealistic and ineffective work programmes, poor contract administration, selection of the suitable method of delay analysis and correct application of it, and insufficient project data, are among the most common factors affecting how time extension is calculated.

There may be several methods to tackle such issues before disputes arise. An effective approach would require early project involvement and utilisation of contract management and dispute resolution specialists. The report suggests the majority of disputes occur during the course of the projects. Various contract forms include dispute avoidance mechanisms. The FIDIC 2017 Rainbow Suite for example introduced the new Dispute Avoidance Adjudication Board (DAAB) to be appointed at the onset of the project. The DAAB is empowered to provide assistance and/or informally discuss and attempt to resolve any issue or disagreement that may have arisen during the performance of the Contract. The FIDIC has a list of approved adjudicators.

Other voluntary methods may include expert determination, mediation, conciliation, and negotiation. There are several international professional institutions and bodies to which parties can apply for the appointment of a suitable expert or a mediator.

Equitas Consulting is a leading specialist consultancy providing high quality expert advisory, claims and dispute management services to the global engineering and construction industry.