European Society of Construction Law Bucharest, 26th October 2018 Developments in procurement and dispute resolution under English law: will withdrawal from the EU make a difference? Jonathan Cope, Director, MCMS, Chair, UK Society of Construction Law Professor Anthony Lavers, Counsel, White & Case, Visiting Professor of Law, King’s College, London

Procurement Law before 1990 Almost complete discretion for tender awarding body in public and private sector As to information given to tenderers/prospective tenderers As to procedure for submission, if any As to criteria for evaluation and award, if any As to adherence to procedures of criteria advertised As to equality of treatment of tenderers As to procedure for award, if any As to reasons given/feedback on outcome, if any 17-Jan-19 (c) Society of Construction Law

(c) Society of Construction Law Transormation in the 1990s The arrival of the tender contract Court of Appeal decisions of: Blackpool and Fylde Aero Club v Blackpool Borough Council [1990] EWCA Civ 13 and Fairclough Building v Port Talbot Borough Council [1993] 62 BLR 82 17-Jan-19 (c) Society of Construction Law

The Two Contract Analysis Diagram A: Ontario v Ron Engineering Two Contract Analysis Contract B = Principal contract Successful tenderer Contract B Contract A Tendering authority Contract A Tenderer Contract A Tenderer Contract A = Tender Contract 17-Jan-19 (c) Society of Construction Law

The effect of a tender contract In the private sector: “there was a binding contract to the effect that the principles of the Code of Procedure would be applied” J & A Developers v Edina Manufacturing [2006] NI QB 85 And in the public sector: “the implied terms of such an implied contract extend to the implied terms of fairness and good faith” Scott v Belfast Education and Library Board 2007 [2007] 114 Con LR 209 17-Jan-19 (c) Society of Construction Law

Role of EU Public Procurement Directive and UK legislation Public Works Contracts Regulations 1991 31 Regulations 1 Schedule Public Contracts Regulations 2015 122 Regulations 6 Schedules 17-Jan-19 (c) Society of Construction Law

Role of EU Public Procurement Directive and UK legislation Of the 122 Regulations Over 20 are based on the Public Contracts Directive Over 15 contain procedures involving the Official Journal and the EU Publications Office 10 are dependent upon the Treaty on the Functioning of the European Union Others refer to the European Court of Justice 17-Jan-19 (c) Society of Construction Law

Role of EU Public Procurement Directive and UK legislation Examples: ESPD and Provisions for Termination Regulation 59 Acceptance of European Single Procurement Document Regulation 73 Contract should not have been awarded on the grounds of breach of the Treaty on the European Union or Treaty on the Functioning of the European Union 17-Jan-19 (c) Society of Construction Law

So: can the Public Contracts Regulations 2015 survive? s.2 “EU-derived domestic legislation, as it has effect in domestic law immediately before exit day, continues to have effect on and after exit day” It is hard to see how they can continue to operate with such a high proportion of EU dependent provision 17-Jan-19 (c) Society of Construction Law

The UK will continue to need public procurement legislation The Public Contracts Regulations could be replaced in time by new provisions. In the meantime, tender contracts offer a degree of protection and potential recourse for public sector tenderers, as they already do in the private sector and in public sector projects below the EU 5 million threshold. 17-Jan-19 (c) Society of Construction Law

The impact of Brexit on construction dispute resolution in the UK Adjudication under the Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act”) is the dispute resolution forum of choice in the UK construction and engineering sector Other ADR processes in use in the UK include: Arbitration – Arbitration Act 1996 Expert determination Mediation None of these processes were introduced as a result of EU Directives or the like, and they should be unaffected by the UK’s withdrawal from the EU 17-Jan-19 (c) Society of Construction Law

Drawbacks of adjudication Adjudication cannot be started until a dispute has arisen, and it therefore cannot be used to avoid disputes arising Adjudication is an adversarial process so may damage working relationships, which in turn may be harmful to the overall success of an ongoing project Adjudication is usually led by lawyers which take the disputes away from the project teams. The project teams therefore no longer own and control their own issues, and this can be detrimental to the project level relationship Adjudicator’s decisions are binding until the dispute is finally determined by legal proceedings, by arbitration or by agreement. Parties are therefore obliged to comply with an adjudicator’s decision until the dispute is decided by a judge or arbitrator or otherwise agreed, and this may take some time and involve significant costs The procedure for adjudication is prescribed in the Construction Act and/or the Contract, together with any supplemental adjudication rules, and the remedies are materially the same as those that can be sought in legal proceedings or arbitration. Adjudication is therefore relatively inflexible and the outcomes available are limited 17-Jan-19 (c) Society of Construction Law

Alternatives to adjudication on large UK infrastructure projects Dispute boards Channel Tunnel Docklands Light Railway Channel Tunnel Rail Link (High Speed 1) London 2012 Olympic and Paralympic Games Queensferry Crossing Transport for London Network Rail 17-Jan-19 (c) Society of Construction Law

Transport for London’s Conflict Avoidance Process Bond Street Station Upgrade – 2013 Duration + complexity + environment + change = potential for disputes Bond Street Station In the heart of London's West End, on Oxford Street Two lines; the Central Line, built in the 1920’s, and the deeper Jubilee Line built in 1975 Currently serves 185,000 passengers per day Forecast 225,000 passengers per day with Crossrail 17-Jan-19 (c) Society of Construction Law

Transport for London’s Conflict Avoidance Process New North Entrance Interchange with Crossrail Replace Escalators 1 & 2 New escalators and route to Jubilee line SFA & new interchange between the Jubilee and Central lines Post Office tunnel over Jubilee line 17-Jan-19 (c) Society of Construction Law

Transport for London’s Conflict Avoidance Process Interchange to/from Crossrail by CRL New escalators and route to Jubilee line New interchange between the Jubilee and Central lines 354-358 Oxford Street. Worksite Limits of Deviation 17-Jan-19 (c) Society of Construction Law

Transport for London’s Conflict Avoidance Process 17-Jan-19 (c) Society of Construction Law

Transport for London’s Conflict Avoidance Process Tanzanian Embassy Listed building New ticket hall New shaft constructed beside listed building 17-Jan-19 (c) Society of Construction Law

Transport for London’s Conflict Avoidance Process 17-Jan-19 (c) Society of Construction Law

Transport for London’s Conflict Avoidance Process TfL considered standing dispute boards, as adopted on London 2012, to be impractical TfL wanted a procedure that could be called upon only when needed (“pay as you go”) TfL wanted an early intervention approach that would allow differences to be resolved without the need for formal dispute resolution procedures TfL developed the CAP with RICS Dispute Resolution Service 17-Jan-19 (c) Society of Construction Law

Transport for London’s Conflict Avoidance Process Key features of the CAP Either party may refer a dispute to a CAP In the first instance, the parties will attempt to agree on the identity of the CAP member/s (one or three) but, if they cannot, then they can ask RICS to nominate the CAP member/s RICS will select an appropriately qualified person/s to deal with the particular issue/s RICS has established a list of CAP members including lawyers, engineers, architects and surveyors It is for the parties and CAP member/s to decide on the particular procedure, but the general intention is that the dispute will be referred to the CAP member/s within seven days of his/her appointment, a response will be issued within a further seven days, and a Recommendation will be issued seven days after that. That is 21 days in total from the appointment of the CAP member/s. Alternatively the parties may submit an agreed bundle The timetable can be extended if required, and meetings and site visits incorporated The CAP member’s Recommendation is not binding on the parties, even if no notice of dissatisfaction is served 17-Jan-19 (c) Society of Construction Law

Transport for London’s Conflict Avoidance Process Benefits of the TfL CAP Process can be dealt with at project level, thereby leaving the ownership and control of the issues with the project teams. It should also result in a less adversarial process than other more formal processes run by lawyers Although the Recommendations are non-binding, given the experience and qualifications of the TfL CAP members, most of whom also sit as adjudicators, arbitrators, etc, the Recommendations can provide a useful indication of the likely outcome in a more formal dispute resolution process. The Recommendations produced should therefore allow the parties to make informed judgments on how to proceed and to assist them in continuing to work together collaboratively Whilst the Recommendations would address the issues raised by the parties, the TfL CAP member/s are at liberty to introduce alternative proposals if they come to the view that such proposals might be of assistance to the parties. Such flexible outcomes are not available in other more formal dispute resolution procedures 17-Jan-19 (c) Society of Construction Law

Transport for London’s Conflict Avoidance Process TfL’s CAP in practice NEC3 – new clause W2.A CAP provisions in a number of major TfL contracts, and going forward they are incorporated in all TfL contracts, including framework agreements Memoranda of Understanding incorporating CAP provisions in other contracts The introduction of CAP has been welcomed by TfL’s supply chain 23 referrals to date My experience of acting as a TfL CAP member 17-Jan-19 (c) Society of Construction Law

Network Rail’s Dispute Avoidance Panel Commercial Directors Forum DAP Guidance Note DAPs work with the parties on live projects to provide observations on potential areas where disputes could arise This principal objective has been summed up as follows: “At its heart, DAP is about establishing a team to be on ‘fire watch’, looking for the smouldering embers of a dispute in the dry grass and inviting leadership teams to take action to prevent a fire.” 17-Jan-19 (c) Society of Construction Law

Network Rail’s Dispute Avoidance Panel Key features of DAPs: A DAP will normally consist of no less than two and no more than four members, and once constituted the DAP members will visit the site to meet and discuss issues with key members of the project’s contracting parties A pre-read pack of information will be provided to the DAP prior to their visit and this will contain the relevant contract documents, programmes, progress reports, applications for payment, etc The DAP will produce a DAP Review Report which provides observations on areas of concern which, if not addressed, may lead to the crystallisation of disputes. The DAP applies one of three categories of status to each observation (critical, essential or recommended), which relate to the likelihood for a dispute to arise from an issue. The DAP Review Report is not binding on the project leadership team 17-Jan-19 (c) Society of Construction Law

Network Rail’s Dispute Avoidance Panel Difference to dispute boards and TfL CAP The DAP members are not just legal, technical and commercial, they also include behavioural experts The DAP is not constituted to decide disputes. Members are also not to advise the parties or mediate any disputes Observations from pilot scheme Concerns over the clarity of the language within the change order provisions Stresses in relationships and competing priorities with wider business interests A lack of integration, particularly with traditional forms of contract Poor contract administration Poor communication 17-Jan-19 (c) Society of Construction Law

Conflict Avoidance Pledge Coalition: Institution of Civil Engineers, International Chamber of Commerce, Royal Institute of British Architects, Chartered Institute of Arbitrators, Dispute Resolution Board Foundation, Chartered Institution of Civil Engineering Surveyors, Transport for London and Network Rail Pledge: “We believe in collaborative working and the use of early intervention techniques throughout the supply chain, to try to resolve differences of opinion before they escalate into disputes. We recognise the importance of embedding conflict avoidance mechanisms into projects with the aim of identifying, controlling and managing potential conflict, whilst preventing the need for formal, adversarial dispute resolution procedures. We commit our resources to embedding these into our projects.” 17-Jan-19 (c) Society of Construction Law

The future of conflict avoidance Recommendations Educating key stakeholders about the importance of collaborative working Educating key stakeholders about the importance of dispute avoidance, as opposed to dispute resolution Educating key stakeholders, including the provision of written guidance, on the diverse ways in which panel members can assist parties in avoiding conflict, e.g. without prejudice meetings, mediations, etc More research and quantification of the cost savings that conflict avoidance can bring about 17-Jan-19 (c) Society of Construction Law

(c) Society of Construction Law Conclusion The Public Contracts Regulations 2015 are heavily EU influenced and it is hard to see how they can survive Brexit intact Tender contracts offer some protection under English law where the Regulations do not apply and could therefore be of increasing importance after Brexit None of the ADR processes in use in the UK construction and engineering sector were introduced as a result of EU Directives or the like, and they should be unaffected by the UK’s withdrawal from the EU 17-Jan-19 (c) Society of Construction Law