How to Navigate Pitfalls in Major Projects

Delivering substantial construction projects is no simple task. In today's changing global climate, the demand and complexity of these projects are increasing. Hence, understanding and mitigating risks become ever crucial.

In our latest episode, we provide you with a synopsis of a recent webinar where experts from Womble Bond Dickinson's (WBD) UK and US offices share their valuable insights on how to identify and navigate the prevalent pitfalls in domestic and international projects.

Read the full article.

About the speakers:
Jessica Tresham
Vicky McCombe
James Ignotus
Michelle Essen
Todd M. Conley
Francisco Balduzzi*

Transcript

Welcome to Womble Perspectives, where we explore a wide range of topics, from the latest legal updates to industry trends to the business of law. Our team of lawyers, professionals and occasional outside guests will take you through the most pressing issues facing businesses today and provide practical and actionable advice to help you navigate the ever changing legal landscape.

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Delivering major construction projects has always been a challenge. The current global climate will necessitate more of these projects, while at the same time making their delivery more difficult. Understanding and mitigating risks is therefore vital.

In a recent webinar, speakers from Womble Bond Dickinson's UK and US offices shared their valuable insights around identifying and circumnavigating current pitfalls in domestic and international projects.

Jessica Tresham, Partner at WBD UK, chaired the event and highlighted that the construction industry is well-known for its project problems, that overruns and delays can ultimately lead to cash-flow issues, and that multiple jurisdictions and stakeholders can be a minefield to navigate.

Vicky McCombe, Partner at WBD UK, explained that the ideal contractual set up from an employer's perspective is a design and build or EPC wrap contract. However, it has become harder to procure this for major projects, at least at a reasonable price. 

Further trends were identified during the discussion. These include: the movement of employers toward construction management, thus creating a more balanced approach than passing all risks down to the contractor. Also, changes to payment or combining payment mechanisms and increased use of target cost contracts and other incentive schemes, and that ESG clauses are starting to appear in contracts, including around corporate governance policies.

Todd Conley, Partner at WBD US, also shared his international experience and pointed out two key criteria for successful projects, those being cost control and avoiding or mitigating significant delays.

When it comes to cost control, understanding the drivers of unanticipated project costs and working out how to manage changes is crucial. Changes are inevitable – the key is to have a "workable" day-to-day process, which can protect both parties if followed. As a rule of thumb, avoid additional problems by consistently following contractual procedures and keeping accurate records.

Additionally, avoiding and mitigating delays needs focus on establishing completion dates (and interim dates leading up to these), and managing the schedule to ensure work is progressing to time. Parties should review the schedule regularly and follow it, but if the timescale slips it is equally important to have a plan on how to recover lost time. 

Francisco Balduzzi, Partner at WBD US in Houston, shared his perspective gleaned from his experience as a former in-house legal counsel.

He gave helpful examples of where he had seen difficulties in international projects, includingthe risk of using a legal term or concept from one country or legal system – such as common law vs civil law – where the terms could mean something different in another country or legal system, so draft with caution, especially when the contracts are translated into different languages.

Another of Francisco’s observations: changes in administration and political instability can result in a reversal or modification of laws, and impact the economic factors agreed under the contract, so it is important to carefully draft a change in law clause in each contract.

Managing Associate at WBD UK, James Ignotus, followed by providing practical tips on how parties can protect themselves when entering into contracts.

In sum, it is vitally important to consider at the outset how to manage supply chains, especially when parts and labour come from outside your home jurisdiction. Making sure the governing law in your contract is right, and mirrored throughout the whole suite of contracts, can make a significant difference in disputes, and in enforcing arbitral awards.

Common pitfalls also include unsuitable contracts and relying on manufacturer warranties instead of collateral warranties. Manufacturer warranties can cause particular issues because they are often issued on the manufacturer's standard terms and if they are not properly entered into as contracts, they may be unenforceable.

For more information, including points speakers made that aren’t covered in this episode, view the link in the shownotes.

Thank you for listening to Womble Perspectives. If you want to learn more about the topics discussed in this episode, please visit The Show Notes, where you can find links to related resources mentioned today. The Show Notes also have more information about our attorneys who provided today's insights, including ways to reach out to them.

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