Reducing disputes in road construction – are we on the right track?

Peter Caillard asks why road construction projects suffer from the same disputes time and time again, and what can be done to straighten out the bends?

Building roads for the betterment of transportation links remains a cornerstone of the economic growth strategies of many developed and developing nations. Road construction can be a complicated endeavour and every project is unique, but with thousands of years of experience it might be expected that the construction industry would have perfected its technique by now. However, disputes continue to plague the process at all stages from concept to completion and, moreover, it appears to be the same issues that repeatedly lead the parties into disagreement.

The data

HKA has been monitoring the causes of disputes through its CRUX programme since 2018. CRUX is an integrated research programme which provides insights into dispute causation on major engineering and construction capital projects around the world. Year-by-year data shows the common causal patterns in disputes across a wide range of disciplines and industries. Interrogation of this data helps us to understand which dispute issues are the most prevalent.

Using CRUX, the top 16 issues ranked by the number of cases in which each issue was cited as a matter of dispute in a highways project were as follows:

It is notable that three of the top eight causal issues relate to design and, if combined, they would top the table. In all cases these issues led to claims for additional time or cost.

These figures represent accumulated data, but a year-by-year breakdown shows a consistent pattern over time, with the same issues continuing to dominate the rankings.

I have given further consideration to the top five issues to identify why they remain so prevalent and to review what actions might be taken either to avoid their occurrence or mitigate their impact.

Change in scope

A change in scope can be triggered by many factors including change of strategy or priorities by the owner, unexpected conditions encountered on-site, value engineering initiatives, and so on. Scope changes require careful management as even a seemingly minor change may impact other parts of the design, construction or construction sequencing. Revised designs must be prepared, checked, approved, priced and issued against a ticking clock but, all too frequently, changes are rushed to avoid delays.

Disputes sometimes arise through scope growth as much as an actual change. On a design-build project, this may result from amendments made between a preliminary design (perhaps at a ‘Request for Proposal’ (RFP) stage) and a final design (the ‘Issued for Construction’ (IFC) stage). If a contractor has agreed a price at RFP stage, its ability to recover additional costs for subsequent changes may be contractually restricted, leading to a dispute with either the owner or the contractor’s designer (based on the scope growth being arguably beyond what might be reasonably be considered normal design development). Equally, arguments around change of scope between a contractor and its designer may focus on whether the designer’s RFP designs contained sufficient detail for the constructor to price with reasonable accuracy. It is in all the parties’ interests to have fully defined from the outset what is to be expected in design packages at each stage of submission. From the designer’s perspective, the best preventative approach is to apply thorough checking procedures to minimise the risk of errors and omissions.

Unforeseen changes

Usually relating to conditions beneath the ground, unforeseen conditions can encompass both natural geology and man-made obstructions or contamination. These continue to bedevil construction projects. The expansive nature of a linear transportation project such as a road or railway, potentially extending for tens of kilometres or more, requires accurate information about soils and geology on a completely different magnitude to a discrete building project on an isolated footprint. For roads, ground investigation tends to focus on investigatory boreholes at the locations of bridges and other structures to facilitate foundation design, with a reduced intensity of survey in between being sufficient to determine soil type for earthworks, understand groundwater regimes, and so on. This requires some interpolation between locations, but where the conditions are intensely variable, interpolation between boreholes may be insufficiently accurate for design purposes. If the ground conditions actually encountered during construction differ from those predicted, resulting in delays and extra costs, a claim may well follow.

Investment in early site investigation is rarely wasted. For most road schemes it represents just a tiny fraction of the overall project cost. Without a good knowledge of the sub-soils, the designer is blind.

Owners and contractors can and do undertake risk analyses through which the chances and consequences of unforeseen conditions can be priced. But there is no substitute for thorough understanding of what lies beneath your feet.

Responsibility for establishing ground conditions should be clear under the contract. Assigning responsibility (and risk) to the contractor for such matters might sound like a smart move to an owner eager to get to site quickly and cheaply, but it is likely that the contractor’s tender prices will be inflated to cover the risk it thereby assumes. Minimising that risk by conducting comprehensive pre-tender surveys (or indeed, participating in risk-sharing), will encourage much keener pricing.

Design

Design errors may be attributed to numerous factors: simple calculation mistakes, use of incorrect design codes, misinterpretation of the brief, inaccurate or insufficient site investigation data, inadequate change control, lack of technical understanding, poor project interfaces, inadequate checking procedures, inaccurate mapping, poor knowledge of site constraints, and several other factors. The list is long, which might explain why design issues are so prevalent in the CRUX dispute causation rankings.

Responsibility for design will vary depending on the selected procurement route. With traditional design-bid-build the owner and its consultant will generally be responsible for the project design, but in design-build, the contractor may inherit an outline design which it is responsible for developing and detailing, in which case responsibility may be shared. In design-build, the contractor may sub-contract these duties to an independent designer. If design responsibility is clear and properly managed, this can work well. If not, disputes are highly likely.

In construction it is generally accepted that the earlier that a mistake is identified, the lower the cost of rectification. If, for example, a bridge foundation design includes errors in its piling calculations, but the problem is successfully identified during the design check, the situation is recoverable with limited effort and damage. However, should the mistake pass unidentified until after contract award (when construction has commenced and materials are arriving on site) abortive costs and delays are highly probable. Should the error not be identified until the bridge is erected, it may be necessary to demolish the bridge.

Perhaps this is an extreme example but, as a general principle, investment in ‘right-first-time’ design will almost certainly reduce costs in the longer term.

The introduction of Building Information Modelling (BIM) has huge potential to reduce errors in design, and therefore reduce the number of disputes. Through the creation of 3-D or 4-D models, with links to supporting documentation, the parties can view their project through all stages of development and can collaborate, communicate, and share information and project records. Potential clashes between different elements of the design (roadworks, structures, drainage, utilities) will be identified at an early stage (if not avoided altogether) and alternative design scenarios may be explored in the confidence that their impact on the wider project is properly understood.

Late or restricted access

Late or obstructed access to a site can cause considerable difficulties – either at the planning stage when access is required for ground investigations and for topographical or other surveys – or at the construction stage where timely access is essential if the contractor is to deliver to schedule.

Once construction starts, delayed access can result in plant lying idle and labour left under-utilised. For linear transportation projects such as roads, a site fragmented by parcels of unavailable land can introduce significant logistical issues, especially if the traditional earthworks haul route running the length of the site is obstructed. Particularly for long linear sites the number of interests crossed or intercepted along the route (land, utilities, etc) may be substantial.

Securing and making available the site is normally performed by the owner prior to construction. Where land possession cannot be guaranteed from the outset, phased land release can be written into the contract at tender stage. By so doing the contractor is at least aware of the limitations and can plan around them. If it is necessary to expedite the start of the works, responsibility for arranging temporary access or permits will sometimes be delegated to the contractor.

Security of land or access rights should be a key priority during the planning stages, especially given that planning and land acquisition procedures may take years to resolve.

Contract interpretation issues

The interpretation of contract clauses continues to be a significant factor in construction disputes, affecting almost a quarter of the projects where HKA has been engaged in the resolution process. Typically, such disputes are more prevalent in bespoke contracts than those employing standard forms, but they are also common where additional, substitute or amended clauses have been introduced, perhaps with poor drafting skill or with insufficient consideration of whether the changed clauses contradict other clauses in the contract. At dispute hearings, a poorly drafted contract will often work against the interests of its author –typically the owner – who had the opportunity to get it right but did not.

Appropriate allocation of risk will reduce disputes. It is often stated that risk should rest with the party best placed to manage it. Yet sometimes risks may be passed from an owner to a contractor through clause amendments with insufficient deference to this principle. This may be dictated by time constraints – for example, no ground investigation data available at tender, making the contractor responsible for ground conditions. Of course, the contractor can price for undertaking its own investigations, but within a fixed tender period, will this be sufficiently comprehensive? Here, short-term gain may mean longer-term pain.

Regardless, time spent wording clauses correctly is time well spent. Drafters should employ fresh eyes to review not just the words employed, but their intended consequences, and to robustly challenge both their soundness and fairness.

Every effort should be made to maximise clarity of the clause wording, especially with regard to the responsibilities of the parties, and all elements of the contract, including drawings and specifications, should be mutually compatible and free of contradictions. Where there is a chance of surprises (for example, ground conditions), contract drafters should expect the unexpected and prepare accordingly, but it should always be crystal clear where responsibilities lie.

Will we ever stop disputes in road construction?

Probably not, but much can be done to reduce the prevalence of the issues which lead to disputes and the significant sums expended annually on their resolution. In particular, for the matters which CRUX identifies as the most prevalent, industry practitioners should:

Recognise the extensive linear nature of a road scheme as opposed to a discrete site and invest in both the quality and quantity of ground investigation. Money spent at this stage is rarely wasted.

Ensure robust checking procedures for all aspects of the highway design (not just those where they are obligatory, such as with structures). Engage an experienced reviewer independent of the original design to ensure that the whole design package is coordinated and consistent.

Document everything thoroughly at all stages, as if anticipating a dispute. Clear supporting documentation is as important for avoiding disputes as it is for satisfactory evidence when they occur. If a formal dispute process is embarked upon, the party with the best records stands the best chance of winning.

Ensure that a robust process exists for the management of change. Disputes often focus on how the change was implemented and its impact on programme and costs. CRUX consistently identifies change of scope as the largest single cause of disputes. Poor documentation of decisions lies at the heart of this. Change in construction is virtually inevitable, so the industry should be prepared for it and manage it better.

Embrace BIM technology. BIM not only facilitates efficient design but addresses one of the greatest obstructions to swift dispute resolution: the shortage of accurate and reliable records. Insufficient or inconclusive documentary evidence enables both sides to claim to be right, but a ‘smoking gun’ will make at least one of the parties think twice.

Conclusions

Disputes in road construction projects are not about to disappear, but there is much that the industry can do to minimise the chances of a dispute occurring and, when it still does, to maximise the opportunities for prompt resolution. Early investment in development and a focus on well-written contracts combined with effective communication must lie at the heart of any improvement.

Some factors are harder to change. Low margins and high risk can encourage contractors to rely on successful claims to turn a profit.  Furthermore, disputes thrive on uncertainty – but risk and uncertainty can both be managed.

But possibly the most significant change we will encounter in the coming years will emanate from increasing engagement with technology, especially BIM, which will impact on all the above issues. It will be of particular interest to revisit the league table in a few years to see whether engagement with technology has indeed impacted on dispute causation.

Regardless, there is much still to get right. The road to dispute-free construction will be a long one!

About the author

Peter Caillard is a Chartered Civil Engineer with nearly 40 years of experience in the construction industry.  Peter has managed projects through all stages of construction from preliminary design through to final account using a variety of forms of contract. He has been engaged with projects throughout the world including the UK and Europe, the Middle East, Africa, and North America, and his experience covers all aspects of design and construction including highway geometry, road pavement construction, drainage, earthworks, highway structures, public utilities, and materials testing. He is widely experienced in the design and construction of highways, transport and infrastructure projects.

“HKA is the leading global consultancy in risk mitigation, dispute resolution, expert witness, and litigation support services.”

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