Conflict avoidance in the Scottish construction industry

Scotland

The Scottish Government has issued a new Construction Policy Note CPN 2/2021: Conflict avoidance – early intervention to avoid disputes. This CPN sets out support from the Scottish Government for conflict avoidance in construction contracts. It urges contracting authorities to align their construction procurement policies. This aligns with a growing trend towards more collaborative approaches and dispute-avoidance in the UK construction industry.

CPN 2/2021

CPN 2/2021 develops policy following the issue of the Project and Business Cases Handbook in the Client Guide to Construction Projects and CPNs 1/2020 and 4/2020. The Scottish Government is urging contracting authorities to ensure that conflict avoidance is incorporated into their contracting strategies. The Scottish Government considers that an approach on conflict avoidance can be informed by balancing the following five project criteria: size; complexity; risks; reputation; and inter and co-dependencies. 

Implications

The issuance of CPN 2/2021 by the Scottish Government is very much in line with a trend towards more collaborative approaches and dispute-avoidance in the UK construction industry.

Throughout the COVID-19 pandemic there has been guidance from the industry (for example the Construction Leadership Council) that contractual parties should embrace collaborative working and the use of early intervention and resolution of disputes.  This was also seen in commercial guidance published more widely, by the UK Government, the British Institute of International and Comparative Law and others.

From the public sector procuring authority’s side, during 2020 there has been a steady stream of SPPNs and PPNs from the Scottish and UK Governments respectively on supplier relief for COVID-19 related delays and interruptions, recognising the importance of service continuity and the wider benefit the construction industry and its supply chain brings.  That approach to addressing COVID-19 risks is being expanded to wider construction delivery risk. The UK Government Construction Playbook, (see our Law-Now here) published in December 2020 emphasises the development of collaborative relationships with long-term strategies. This includes a suggestion that the RICS Conflict Avoidance Pledge be adopted into public work contracts.  In May 2021 CEDR (the Centre for Effective Dispute Resolution) published its Ninth Mediation Audit, providing more evidence of the continuing popularity of mediation in the UK (see our Law-Now here).  It highlighted the increased use of mediation, very healthy levels of savings arising from the “quicker and more effective resolution of commercial disputes”, as well as a huge increase in virtual mediation.  This will have rung true for the construction industry, which already makes good use of mediation.

May 2021 also saw the JCT publish its Dispute Adjudication Board Documentation 2021 (JCT DAB 2021, see our Law-Now here). The DAB 2021 was prepared to provide for dispute adjudication boards within certain JCT contracts, which were compliant with the Construction Act (as amended). The main aim of the DAB 2021 is to set up a dispute board to allow for collaborative working and early involvement for the board, prior to the raising of formal proceedings. 

Conclusion

Taking these developments together, it is clear the construction industry and procuring bodies are being encouraged towards more collaborative approaches, including early intervention and dispute avoidance. Putting CPN 2/2021 into practice, the Scottish Government is asking contracting authorities to “align their construction procurement policy” with the principles of conflict avoidance.  This could see the introduction of new policies; tendering requirements relating to collaborative working; increased use of Project Bank Accounts; pricing options to motivate positive behaviours; contracts with a tiered conflict resolution or escalation provisions to precede a traditional dispute resolution process and parties embracing alternative dispute resolution when disputes arise.

Links: Construction Policy Note (CPN 2/2021): Conflict avoidance – early intervention to avoid disputes.