Speaker 1 00:00:00 Hi all. It's Jacob Austin here from QS.Zone and welcome to episode 84 of The Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow, and grow their business. Today's episode is all about conflict avoidance. That might not sound as thrilling as a new drone or a cutting edge BIM technique, but it can save you thousands of pounds, mountains of stress, and several hours wasted on unproductive disputes. So we'll be diving into an initiative championed by the RICS, which is the Conflict Avoidance Process, or CAP. We'll also look at some insights from industry experts on how CAP is gaining traction, and how early involvement of neutral experts can prevent minor site issues from exploding into legal nightmares. So if that sounds interesting to you, let's dig in. And of course, before we start, if you're new to the show, please do subscribe for more user friendly advice on all things subcontracting. So if you're a subcontractor wondering how to avoid legal costs, preserve relationships, and maintain collaborative work with your main contractor or client.
Speaker 1 00:01:30 This episode is especially for you. Now let's dig in. Why are construction disputes so costly? Well, let's look at the state of the UK construction industry. It isn't exactly in a golden era at the moment. We've seen big economic uncertainty and colossal inflation on materials that is hurting already tight margins and strained relationships in the supply chain. That makes it a pretty tough gig right now. And when disputes surface, they often become that proverbial straw that breaks the camel's back. Or maybe the project's back in this instance, leading to delays, cost overruns and relationships left in tatters. Litigation, adjudication and arbitration might solve the dispute, but they typically leave both parties drained of time and, of course, money. And it's in that environment that the conflict avoidance process is a glimmering beacon of hope on the horizon. It's aiming to be like an early intervention mechanism to keep issues from ballooning into formal adversarial processes. They're trying to nip problems in the bud before they get out of hand. And for that reason, there is quite a big appeal to conflicts avoidance.
Speaker 1 00:02:47 We're all aware that the typical approach to disagreements in construction is reactive. A minor issue arises. It festers, it escalates. Someone then claims a variation or extension of time, it gets disputed. You reach a standstill. Somebody calls a lawyer or a claims consultant, and before you know it, you're both spending tens of thousands of pounds on legal fees or lining the pocket of that claims consultant. And even if it doesn't come to that, sometimes the main contractor feels backed into a corner. And so they bite the bullet. But then your business relationship with them is poisoned. CAP is here to flip the script and introduce proactive conflict resolution instead of waiting for a meltdown. Parties commit to a structured process, preferably right from the outset of their subcontract or contract, and they commit to identifying and addressing emerging issues. It's the difference between nipping a weed in the bud versus hacking through a full grown, thorny bush. And so far, the process has been really effective in resolving issues between parties and allowing them to complete projects, maintaining that spirit of trust.
Speaker 1 00:04:01 And that's not just rose tinted glasses and marketing spiel. Transport for London has tested CAP on about 20 projects and found big savings in avoided claims. There's also speak of it being rolled out into the UK Parliament refurbishment scheme, likely to cover all future consultant and construction contracts, and it's being encouraged by local government as well, so it may well be coming to a contract near you soon. So what exactly is the Rics conflict avoidance process? Well, handily, the Rics publish a set of rules and some potential clauses for you to add in to your agreements, and the idea is to make this a simple bolt in process that you can add to any contract, which results in an impartial, expert assessment of a disagreement. This culminates in a written report with recommendations. Now, usually those recommendations are non-binding unless the parties agree otherwise. And the end goal is that informed negotiations happen. That then keeps you out of a formal dispute resolution route. At this point, it isn't a compulsory step in standard forms of contract, but there is some momentum growing to try and embed CAP clauses or references in building contracts that allow for it to be easily introduced.
Speaker 1 00:05:26 So let's talk through the process, and I'll try and point out how it should help you as a subcontractor. So the goal of the overall process is to resolve emerging and established issues with a subject matter. Experts help. It's supposed to be non adversarial because it is neither an adjudication nor an arbitration. It's more like having a mini independent investigator question the matter and try and get to the nub of the problem, and it's supposed to be an inquisitorial approach. The end goal is for that subject matter expert to issue a reasoned report with some practical recommendations on how you can both move forward. So, in essence, it's a chance to solve disputes without the formalities and expense of the legal battle. If you're worried about a main contractor's refusal to pay for certain changes, you can trigger a CAP if your contract has it embedded. If you are to start a CAP process, then the parties need to cooperate and follow the CAP panel's lead. That also means signing up to the rules of the process. You can't expect it to work unless you're willing to commit to it fully and give it a fair shot.
Speaker 1 00:06:41 The actual panel itself is typically built up of 1 to 3 independent persons with relevant experience. They're there to clarify the issues, gathering evidence by questioning an investigation and then produce the recommendation. So this is like a neutral expert's approach. And the idea is that the panel members should be formed out of people that can get to the nub of the issue. So for a steel frame tolerance debate, the panel might include a structural engineer with some site experience who can quickly review it and look for fair solutions. And you can imagine that the pragmatism brought by this approach is going to be a lot more useful than having two lawyers in crinkly wigs arguing with each other in front of a judge, and none of them perhaps knowing the technical nuance behind what you're arguing. That panel is chosen by requesting the Rics to appoint one. The party requesting the panel is known as the applicant, and then the other party is the respondent. In a similar fashion to an adjudication. If there are names that both of you can agree on, then you can propose those or let the RCS pick somebody suitable for you.
Speaker 1 00:07:53 The panel must be neutral. Conflict free, as in doesn't have pre-existing relationships with either side. They must be qualified and up to date in the relevant field, and they can't have been used before in any formal legal disputes about your particular project. And the idea behind this is to give your dispute a once over by an independent panel that aren't going to lean unnecessarily in either direction, and to choose people that will have some knowledge to be able to make a decision or a thorough recommendation. Everything is done in confidential format. The one caveat to that is that if the law later demands disclosure, then that confidentiality can be overturned. But barring that, there's no risk of there being headline news. If your business happens to go through this process so you can speak openly without the fear of it being used against you, which hopefully generate some open and honest debate. Each panel member then signs an agreement with all the parties before the work begins, and the process starts when everybody has signed the document. The agreement locks in the panel's role, their fees, the time frame to respond, and also the acceptance of the rules themselves.
Speaker 1 00:09:11 Then there's a joint meeting held with both parties to define the issue. Talk about the procedure and that timescale. They confirm whether site visits or perhaps separate interviews with each party are needed, and they'll also establish the extent of evidence that you might need to provide to support your case. This is your chance to outline your perspective, highlight concerns, and decide how the process unfolds together. There should be no surprise hearing or hidden steps. Communication should be all together in an open fashion throughout the process, so there's no one sided or secret chapter with the panel members. The panel themselves have some powers throughout the process and they can request documents, hold site visits, perhaps question witnesses, or bring in experts to speak about the issues. The process should avoid the typical pleadings and response approach, which means the panel can cut to the chase, gather the right information, and not get bogged down in legalistic procedures. This helps them to get to the root of the issue and propose sensible solutions. The CAP panel being built up of professionals with their own expertise, their own background.
Speaker 1 00:10:27 They're able to use this to their advantage to try and mediate the issue, gather insight and they can do that in a flexible way that creates a kind of problem solving environment. They might do onsite inspections, talk to your site manager, or run mini hearings with key staff. They're able to mold the process to suit the dispute and so that they can get to the bottom of the issues. Then they summarize that in a report with a sensible outcome and reasons as to why they're getting to that outcome. There is, of course, a cost to the process, but typically it's a fraction of the cost of going to adjudication or indeed to court. You can control the cost by limiting the scope or the complexity. If your dispute is a narrow subject, the costs are then usually shared equally unless it's agreed otherwise. So as I mentioned earlier, CAP has been used on about 20 projects by transport for London and they saw a significant reduction in the extent of contractual claims. So that's meaning less formal disputes, less money thrown away at lawyers or claims consultants.
Speaker 1 00:11:36 And if a large, complex client like TfL can integrate CAP effectively, then it suggests that we can do it on your typical building project. Two the biggest advantage from a subcontractors perspective is speed here instead of months back and forth blaming each other. You get somebody involved to resolve the issue earlier, maybe even before it all results in a big delay. This could be from a specialized industry veteran who's seen it all before. It can diffuse and wind down the tension on the job because you're not getting into a combative stance. It's not about who can be who in a legal argument. It's about cutting to the point, finding a solution and moving forward with it. And rather than spending hours and hours developing a claim, you can bring the CAP process in at the point when the dispute is starting to form and get it resolved before you spent however long stewing and formulating your case. And God knows how much money goes into that as well. If you're about to sign a contract, it's worth looking at the conflict avoidance pledge.
Speaker 1 00:12:43 Over 475 organizations in the UK have already signed that pledge. Including several main contractors. You might also want to sign the pledge yourself as a subcontractor. It might be a little reputational badge you can pin on your website to show that you're serious about avoiding conflict and resolving things amicably and again before signing your contract. It might be worth seeing if you can introduce a CAP clause to try and encourage that more pragmatic resolution before somebody calls in the heavies, the legal heavies. I mean, unless the contractor is proposing it themselves, then it's something you're going to have to agree on and perhaps point them in the direction of the RICS website and the CAP process itself, because it more than likely will be better for both of you. If you do get it embedded, then you need to tell your team all about it. That means your project managers, commercial staff, site supervisors so that they know what they're dealing with. The early you can spot potential conflicts, the easier it is to push them into that resolution process and put the thing to bed.
Speaker 1 00:13:51 Now the process is about being proactive and that means raising the issue, speaking about it early, and referring it to CAP in good time before your relationship with your contractor has potentially gone sour. The one thing that is consistent across any kind of dispute resolution is that this is depending on your records, so it's still just as important to keep your site diary to document important conversations on email, to track your costs effectively and keep tabs on things that are hurting you on the job. These are all the good kind of records that you ought to be keeping as a matter of course, they'll serve you well in whatever dispute resolution you end up going down. And the better the records that you have, the more likely the dispute is going to be resolved in the way that you want. So what are the drawbacks to this approach? Well, I already mentioned that it's a non-binding process. You can make it binding if both parties agree to it at the start. But a non-binding process fosters better collaboration. And even if the process doesn't bind you to a particular outcome, if an impartial expert sides with you, either in part or in full, that recommendation carries a lot of weight.
Speaker 1 00:15:08 It's difficult for main contractors or clients to disregard a well-reasoned third party review and outcome, especially if it later will lead to a formal dispute where the same facts might resurface and you've already seen them, so you can already prepare your response to them. So essentially, the cards are on the table already. What's the chances of them playing out in a different fashion just because they're being seen now by a different audience? There's also another point in that both adjudicators and the courts don't like waste of their time. So if you have gone to the trouble of going through the CAP process, the adjudicator or the judge is going to want a pretty good reason for not sticking to that outcome. Now, you might think this is just another variation of a mediation or some kind of dispute resolution board, and it's true that the construction world is full of alternative dispute resolution processes. You've got dispute avoidance boards, mediation, conciliation and so on. Well, this is slightly different because this is backed by a professional organisation, the Rics.
Speaker 1 00:16:18 And it has a structured and inquisitive approach. Also the impetus here is on avoiding conflict escalation. So the idea is to involve the process early, not just when it's become a fully fledged dispute that both parties are entrenched in. So it's an early intervention. It also doesn't remove your right to adjudicate. The construction Act still applies. and the introduction of the CAP process doesn't remove that as a legal right. But if you sign up to a contract that says that you've got to attempt CAP first, you typically can't just jump straight to an adjudication without giving CAP a shot. And this process genuinely has the possibility of becoming the norm in the construction industry. That might be an optimistic view, but there is backing from a major professional organization. There's also a long list, if not comprehensive, list of major industry bodies that have already signed up to it. When you add to that that there's proven success already in a large scale trial with transport for London, plus endorsements from the construction playbook and government agencies, it points towards this becoming a mainstream thing.
Speaker 1 00:17:34 So you, as a subcontractor, might soon find yourself on a job that has a mandatory CAP clause. So it might be useful to get familiar with it now, rather than have it sprung on you midway through a project. And the clue with this process is in the name conflict avoidance process. So this is about dealing with problems as soon as they appear. So think of this as like the early warning for a dispute. You haven't let the dispute become a big monstrous issue. This is your opportunity to step in early. Use an expert or a panel of experts to gain clarity and bring the matter to a close. There's no point going into this with an overly adversarial stance. This isn't a will just smash them in adjudication situation. It's a quick, accurate and cost effective investigation, and it should preserve your working relationships by working through the issue together. Don't forget also those records. As I mentioned earlier, they will come up whether you go through a formal dispute process or you try and avoid that by using this process.
Speaker 1 00:18:42 That means there is some inevitable admin involved and it relies on you, your contracts manager, your site manager collating details that are going to be relevant to set you on the right path. If you are embarking on a CAP backed project, you might want to consult with a construction professional or somebody that has seen it in action. Forewarned is forearmed, as they always say. If you do end up seeing the process through, then keep calm and comply with it. If the panel wants to have a site walk, then cooperate with it. If they want to see documents, then be thorough with what you provide them. Non-cooperation might paint you in a bad light, and you want the panel to be on your side and let the facts speak for themselves. And there you have it in a nutshell the RICS conflict avoidance process. More information is available on the RICS website. And that's the same place you can go about signing up to the conflict avoidance pledge to show your commitment to avoiding conflict and hopefully preventing disputes.
Speaker 1 00:19:47 I hope you found that useful. My mission with this podcast is to help the million SME contractors working out there in our industry. If you've taken some value away from today's show, I'd love it if you'd share the show and pass that value on to someone else who'd benefit from hearing it. And of course, subscribe yourself if you haven't already. And thanks for tuning in. If you like what you've heard and you want to learn more, then please do find us at w w w exon. And if you're a fan of social media, we're also on all your favorite socials again at Q zone. Thanks again. I've been Jacob Austin and you've been awesome!
