OPI NION
John FFF Brien, Principal, John FFF O’Brien Ltd, Dispute Resolution & Legal Support Consultants.
‘The time is now for our nation’s Public Works C ontrac ts to evolve’ JOHN FFF O’BRIEN writes that resolving a disputed public works final account with the assistance of a neutral third party is as much a part of the construction process as the physical setting out of the works, but this should not be the case.
W
e have an overwhelming obligation and responsibility to the generations to come not only as a nation but as an EU member state to address the reasons for the uncertainty in our public works contracts. This is particularly urgent if Ireland is to build and maintain its infrastructure into the future.
THE PERFECT STORM
The 08 June 2010 was the date that the 2010 Arbitration Act became law in this country. This occurrence was the last in a series of three unfortunate events that adversely affected the construction industry, which gave rise to what I respectfully refer to as the “perfect storm”. The two other events were the introduction of the new form of public works contract (PWC) in 2007 and the 2008 global financial crisis. The perfect storm created by those events has continued to blow fiercely for more than a decade.
THE INTRODUCTION OF THE PWC
Before identifying how we solve the problem, we need to understand it, and for that, we have to consider its origins. In 2007, the first versions of the PWC were introduced to replace the government department and local authorities (GDLA) “blue” and “yellow” forms of contract (for
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use on employer-designed building works) and the IEI (now Engineers Ireland) form of contract (for use on employer-designed civil engineering works). These new contract forms were developed as a reaction to a “politician’s brief ” and were purported to achieve out-turn cost certainty, as a disgruntled electorate were seemingly fed up with cost overruns on government contracts. However, what many politicians didn’t understand (and indeed many mainstream journalists too) is that construction contracts are all about risk allocation and that to achieve commercial value for taxpayers’ money, the risk ought to remain with the party who is best placed to manage it, and, critically, when you mismanage this allocation, it can get quite complicated and expensive. In theory, the objective of the new PWCs was to procure tenders from contractors that would become pure “fixed-price lump-sum” contracts, thereby giving cost certainty. There would be no more undefined or provisional works in these new contracts, nor would there be any contingency slush funds – contractors would simply be paid one agreed price for one defined package of work. Of course, it was expected that the lump sums tendered under the new regime would be slightly higher than those
that would have been tendered under the previous government contract forms, but now, in theory, there would be no chance of any ‘runaway’ costs over that tendered lump sum. Consultant design engineers and architects did not escape the new regime either, as their brief was to comprehensively define and design the works as required by the employer’s brief so that there would be little or no extras whatsoever. This is not an easy task to achieve, and perhaps that is why every international standard construction form of contract has a variation clause that does not vitiate the contract. Even projects for historical public building refurbishment works, which were traditionally tendered and contracted on a provisional basis with a schedule of rates, incorporated a new PWC “heritage strategy” that required an investigative works contract to be carried out in advance. This was to uncover and record what lay beneath the rotting fabric of a building so that the architect could ‘comprehensively’ complete their design. This scope was then tendered and contracted on a fixed-price lump-sum basis. That process, although looking good on paper, has in my experience not worked out too well either, and even the recent part refurbishment of Leinster House needed
