08 September 2015 #Construction
Clients regularly ask us to review and comment on proposed contract terms, which reviews often result in a schedule of comments and suggested amendments, to which the client will refer in contract negotiations.
If the contract is particularly large, or the client is particularly concerned, we will be asked to provide a detailed analysis of the various risks arising out of the contract terms, which will often be on a “traffic light” basis (i.e. red = high risk, green = low risk).
All very sensible, I hear you say. However, and more often than not, those contract reviews are not used beyond the contract negotiations. They don’t even get as far as the contract itself, which is usually handed to the project team only to be filed away (for reference only when something has gone horribly wrong).
As any contractor will know, its project managers do not generally have the time, the inclination, or the requisite skills, to familiarise themselves with (or understand the terms of) contracts consisting of over one hundred pages of terms and conditions.
However, and especially with, for example, the NEC3 forms of contract, the contract terms provide the processes pursuant to which the project is (supposed) to be run. There are mechanisms for change control, delay events, payments, etc. and failure on either side to follow those processes may cause them to lose out. Those processes can be compared to the requirements for payment and pay less notices under the Construction Act, with which most readers of this article will be familiar (and have the scars to prove it).
Therefore, the lesson here is to get maximum value out of your contract risk reports by ensuring that the people running the project are made aware of them and are furnished with a copy for reference throughout the project. Obviously, providing training on the underlying form of contract would be a sensible addition, but reality rarely allows for such extravagances!