Page 21 - Civil Engineering Project Management, Fourth Edition

Civil Engineering Project Management
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In 1985, in an effort to reduce claims, the UK Department of Transport
(DTp) proposed to deprive the independent Engineer of his role in settling
claims under contracts for motorways and trunk roads, and let one of their
own staff decide what should be paid. The DTp faced especial difficulties
because road building involves much below-ground work and building in
earth. Even minor changes in below-ground material from that expected can
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give rise to large extra costs for the contractor. However, due to wide oppos-
ition, the DTp did not pursue its original intentions. Instead both the DTp and
other public bodies sought to have more say in decisions on claims, such as
giving the promoter a right to have his own staff take part in discussions with
the contractor on claims, or requiring the Engineer to consult with the pro-
moter on any claim exceeding a given amount.
1.6 New approaches to construction contracts
in the 1990s

In 1991 the ICE published a new type of contract called the New Engineering
Contract (NEC) which aimed to promote better management of construction
contracts to reduce claims and disputes. Under it a Project Manager acting
for the Employer administers the contract and a separate Adjudicator is
appointed to settle disputes, subject to later arbitration or legal settlement (see
Section 4.2(f)).
In 1994 changes to the construction industry to improve its efficiency were
proposed by Sir Michael Latham in his report, Constructing the Team, commis-
sioned jointly by the government and industry. He recommended use of stand-
ard contracts with payment and dispute terms defined, such as in the NEC,
setting up registers of approved consultants and contractors for public work,
and measures to protect contractors and subcontractors against delayed or non-
payment. The more radical of his proposals met opposition and were not
adopted; but his report resulted in the UK government passing the Housing
Grants, Construction and Regeneration Act 1996, Part II of which, dealing with
Construction Contracts, adopted a number of Sir Michael’s key recommenda-
tions. This Part II required that all contracts for construction should provide for

• the right of a party to the contract to refer a dispute to adjudication;
• entitlement of a party to the contract to be paid in instalments;
• no withholding of payment due without prior notice;
• payment not to be made conditional upon the payer receiving payment
from a third party unless the latter became insolvent.

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A technical paper published by the ICE (Paper No. 9999, 1992) showed how a reduction of 24 per cent
in soil shear strength from that expected could result in an increased rolling resistance for earth moving
equipment which reduced plant productivity by 37 per cent, costing the contractor that much more.