The current economic climate has given rise to more conflicts and disputes than ever in this country across all commercial and industry sectors. For this reason, Joe believes that it has never been timelier for people, including those in the construction industry, to become more aware of alternative dispute resolution processes. Behan Dispute Resolution currently has a total of 70 disputes on its books — in excess of 30 of them are construction-related.

`When it comes to the construction industry, there has been an avalanche of disputes over the past two years, particularly over the past 12 months,' says Joe Behan. `The disputes that I have been dealing with involve main contractors in dispute with subcontractors, main contractors versus clients, and clients versus their design team. I attribute the increase in construction disputes to the fact that the future has dried up for a lot of people and all they are left with is the past. During the boom years, construction companies used the future to get past their current difficulties and that was how business was done but when there is no future people become anxious. Also, a lot of business transacted between 2005 and 2007 was done on a wink and a nod. For example, I conciliated on two disputes within the past two years' where there was no written contract and the value of the contract was almost €100m in each case. One of the disputes has gone to the courts and the other one will go to arbitration. However, it is important to note that this trend is not confined to the Irish construction industry. Increases of 30% and over have been registered with disputes resolution organisations all over the world and the global recession is the main reason for this.'

 

Most of the construction disputes that Joe handles relate to non-payment. `In the past, subcontractors would never have taken main contractors into arbitration because they didn't see it as being in their best interest but that has changed completely and the CIF has been deluged with those disputes,' he says. The objective of the Construction Contracts Bill, proposed by Senator Feargal Quinn, is to create cash flow in Irish construction, which is what similar legislation has achieved in the UK construction industry. `The existing processes for arbitration and conciliation don't facilitate cash flow,' says Joe. `The 2009 Adjudication Act in the UK covers every element of disputes. It has yet to come into force but when it does it should be very effective because with an adjudication system, when you get a decision, the money has to be paid irrespective of whether it goes to arbitration. Clause 13.1.11 in the Public Works Contracts provides that, following a dispute, once a recommendation is made that money has to be paid even if the conciliation falls apart so that principle already exists for government contracts but not in the private sector. Of course the provision in that clause is subject to a bond so it is stacked in favour of the big government employer and the larger main contractors.'

In Joe's experience, who are the main culprits in construction disputes? 'It depends on who you ask in the industry!' he says. 'Contractors will claim that architects are most culpable, followed by engineers and then quantity surveyors. The architects will blame the contractors and the client will blame all of the above! In my experience disputes are usually down to a lack of communication and unclear provisions in contracts.'

 

While arbitration is utilised in the majority of disputes, the use of the mediation and conciliation processes are on the increase. 'People are now more conscious of trying to resolve disputes quickly and avoid huge costs because arbitration can drag on,' he says. 'In the past construction disputes went directly to arbitration and now mediation has come into the CIF's subcontractor contracts for non-government works and conciliation has come into the new government contracts where it was just arbitration. Also, people are looking at ways of resolving disputes that bypass the dispute resolution provisions of contracts. In addition, people can be in arbitration and can maybe put the arbitration process on hold for a while as they pursue mediation/conciliation discussions privately. That has become a very common practice. There is no mandatory mediation but the courts have been encouraging it hugely and the Circuit Court has been empowered to recommend mediation and arbitration whereas previously only the High Court recommended mediation.'

 

With new forms of construction contracts and new legislation coming on stream, the country is now in a major transition period regarding dispute resolution. 'The new Arbitration Act came in on 8 June, we may have a new Construction Contracts Bill that would bring in adjudication in construction disputes in Ireland, and we have the Department of Finance's "new" form of Public Works Contract, which was introduced in 2007,' he says. 'Disputes arising from the "new" government contracts are coming on stream now but, in addition, we are still dealing with disputes arising out of the old GDLA contracts. Also, there are two major disputes that I'm aware of under the FIDIC contract — one relates to a major road contract and the other relates to a major rail project.'

Joe's firm currently has five disputes on its books relating to the 'new' government contract. `Two of them are main contractors in dispute with subcontractors and the other three are employers who are in dispute with main contractors — all five are in conciliation,' he says. 'Clause 10.3.1 in the new contracts, which relates to Contractors' Claims and the issue of when to give notice of a claim, is very problematic for the industry. The wording of this clause is being used by employers and main contractors to kill off claims by saying that notice wasn't given on time. I'm dealing with a €9m claim which involves a main contractor and a subcontractor over the issue of when a notice of a claim should have been given. I'm hearing that, with most of the claims being made by contractors under this clause, the engineers on the projects are saying they are out of time when they make their claims and therefore the claims are invalid.'

 

 

Joe reports that, as areas of the new contracts are becoming recognised as having loopholes, those loopholes are being closed by the government. 'There have been few, if any, arbitrations under the new contracts but the Department of Finance is entitled to retain and read any awards and file them away,' he says. 'They are then in a position to monitor where arbitrators are finding problems in the contracts. They can then plug those gaps or clarify any unclear areas. I think the practice of the outcome of arbitration awards being automatically retained by the Department should be stopped because it could create a fear among arbitrators and conciliators that future appointments will be stymied if they continually go against the public sector in their decisions.'

Joe also believes that by listening to the concerns of the construction industry and reforming the public works contracts the government could reduce their costs in relation to disputes. `The shift of risk completely to contractors is not right,' he says. 'We will see considerable difficulties with contractors who have taken on risk unwittingly and it will create problems in terms of completing projects. People are tendering at extremely tight margins and they are taking on huge risk so you don't need a crystal ball to know where that will lead. There is scope for reform of the existing contracts but I would be surprised if it happens because the government sees no benefit to them to do so at the moment. However, that may change as more and more projects are completed under these new contracts and it becomes apparent that their provisions are creating problems for construction firms.'

 

Joe has worked as a structural and civil engineer for the past 36 years and heads up his own

`Dublin-based practice of JP Behan Associates Consulting Civil & Structural Engineers.

Allied to the 15 years that he has spent working in dispute resolution, his engineering background and experience means he has a strong interest in seeing the government take immediate measures to arrest the current freefall in construction. appreciate that the government is spending a lot on the capital side but we must keep up with our competitors in terms of infrastructure,' he says. 'There is a rumour that they will drop €1bn off the capital programme this year and that would be a disaster.'

He points out that construction has been represented as an industry of big developers and has therefore become too associated with developers in the public mind. 'The reality is that it is much broader than that and that most general contractors were only making three per cent to four per cent margins during the boom,' he says. 'The public perception is that everyone made vast profits. Also, the construction professions have been wiped out and forgotten about in this crash.' A survey carried out earlier this year by specialist recruitment consultants Hay Ireland (see February issue of Construction & Property News) revealed that three in five employees in architectural companies have lost their jobs since 2007. `If 60% of doctors in Ireland had no work in the morning they wouldn't be quiet but there is no voice for the construction professions to highlight their plight,' he says. 'There is no kicking or screaming being done by the professions, either individually or collectively. It is sad to see so much brain power leaving the country at all ages and all levels in our industry.'