Lyndon White: Construction contracts reflect a changed industry

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Lyndon White outside an office

With unprecedented investment going into global infrastructure, and projects becoming more complex, larger and cross-border – we speak with alternative dispute resolution (ADR) expert Lyndon White (LW), an international contracts consultant in Australia, about why he is developing an international collaborative contract with FIDIC.

IG: The infrastructure industry has talked for decades about the potential benefits of greater collaboration for major projects. So why is it that conventional linear approaches and contractual relationships have lasted so long?

LW: “The answer to any contractual arrangement is not ‘yes or no’, it’s ‘yes and no’. So it’s not that the current forms of contract available to us prevent collaboration, it’s more that they don’t have specific references to make it easier.”

“People actually like the fact that ‘yes and no’ is possible, especially if the parties are willing and able to take that to the next step. The driver for a collaborative form of contract is to facilitate that step more easily.”

“we need to find mechanisms to get contracting parties to better disclose their decision points and constraints to each other to enable alignment across a project.” Lyndon White

Aligning motivations
IG: What about the longstanding concern that conventional contracts sometimes misalign objectives and motivations across a project. Is that true, and is a more collaborative contract able to change it?

LW: “The industry has changed so dramatically during the 20th and 21st centuries. If we talk about projects and relationships in the last century and the techniques involved, a lot of clients had their own engineering, procurement and construction capabilities. Then they started to de-risk themselves and divest assets and obligations to other entities and contractors and this led us to the point where there are multiple decision points and decision-making entities.”

“This means we need to find mechanisms to get contracting parties to better disclose their decision points and constraints to each other to enable alignment across a project.”

“Conflict can be productive when there are different views about how best to adapt to an arising challenge. Openness about that can avoid things getting to disputes.” lyndon white

A reshaping of industry
IG: So alongside social drivers like net zero, greater collaborative tools are now partly needed because of how the industry reshapes itself?

LW: “Yes. Established organisations that are contracting and developing projects during the current energy transition can refer to and embed their experiences from prior projects during delivery. But now with the net zero energy transition, there are a lot of new interests, a lot of new vendors out there and there’s a social need for the energy transition to go well, but there is not necessarily a sustainable delivery mechanism for it to occur unless we put something new in place such as a collaborative form of contract to assist with understanding what works and what does not.”

The practicalities of collaborative contracts
IG: So what is the practical difference with a collaborative contract?

LW: “Fundamentally we must be embedding a huge degree of transparency supported by integrity. Transparency between parties is so critical because it’s great for people to share information and when you attach integrity to that, it opens up what you do with the information. Then you look at the sustainability side of things, you have everyone on the project all the way through to the stakeholders, able to help deliver a successful project collaboratively.”

“That doesn’t necessarily mean that it removes all risks from the project process and teams. But it’s another way to provide a lot more visibility over what your risks are and how to control them.”

“We need to get into the specifics of whether there are certain sectors and parts of sectors that can work in a collaborative way better than others.” Lyndon white

IG:  So can a collaborative contract really reduce disputes and avoid defensive behaviours?

LW: “We need to recognise the role of conflict in a project. Conflict can be productive when there are different views about how best to adapt to an arising challenge. Openness about that can avoid things getting to disputes further down the line. Conflict may lead to dispute, but a dispute is unlikely to exist without conflict. What is important is to reduce the conflicts that can lead to dispute and this can occur when there is transparency between parties and stakeholders about decision points and decision-making.”

Investment growth and risk management
IG: There is a significant global investment right now in infrastructure as the world seeks to recover from the pandemic, tackle climate change and to meet SDGs. So how do we make the case for collaboration as a de-risking tool for that money?

LW: “The biggest risk transfers occur between the insured and their insurers. This is because insurance contracts and policies reflect a transfer of risk between insured and insurer. Having insurers working through a collaborative exercise can help articulate how the risk transfer between the contracting parties impacts on a project. That can lead to a change in the insurers’ outlook as risk management asserts itself properly instead of risk transfer and eventually premiums will reflect that more comprehensive understanding of the costs and risks of and to a project.” 

Developing a new contract
IG: You are part of team developing a collaborative contract right now. How important is it to get a diverse insight into that development process and what does industry need to share with you to make sure it works?

LW: “We need to get into the specifics of whether there are certain sectors and parts of sectors that can work in a collaborative way better than others, or that have a greater need for it. To do that we want to hear from people experiencing project delivery around the world right now.”

 

To share your insights with the team developing the new collaborative contract, you can start by taking part in their survey by clicking here