You Asked Us: Conflict causation, avoidance and resolution in the Middle East construction sector

How can approaches to procurement be improved? Do settlements unfairly favour larger firms? And are verbal settlements worth the paper they’re written on? During our recent webinar with HKA, you asked us; here, our expert panel responds. 

Our expert panel:

• Julian Haslam-Jones, Director, HKA
• Shamila Neelakandan, Head of Operations – Singapore & Malaysia, HKA

In the Middle East, the lowest bid generally wins. Could an alternative procurement approach help to reduce disputes?

Shamila Neelakandan: A more competitive bidding strategy which includes technology advancement, shorter timelines, sustainable project objectives or any value added propositions should be included in addition to competitive (but not necessarily lowest) pricing. More comprehensive bid assessments, will help to drive forward sustainable projects in the region.

Julian Haslam-Jones: It is possible that such bidding strategies can reduce the risk of disputes. Relying solely on the lowest bid can lead to delays and longer-term increases in budgets. Nevertheless, other risks which can lead to disputes will remain during the course of the project and need to be monitored and managed by the parties.    

There is a knowledge gap between big and small firms on how to manage disputes as they arise, meaning outcomes often favour the “big fish”. How can the industry address this?

SN: In the context of legal services, legal aid is available for small businesses subject to local regulatory requirements. For other disputes, the imbalance is prevalent – especially where one party is equipped with the power of evidence to succeed. At present, the construction industry is unlikely to set up aid to support small businesses in disputes. In my view, it is not so much the case that the big fish has better ability to retain more costly representation and, therefore, a better level of service. It’s more about how evidence is presented and records managed. In this respect, the focus should be on adequate contact administration processes and techniques for dispute avoidance – as discussed during the webinar.

JH-J: Furthermore, it is very important that the relevant party seeks to resolve the matter at the earliest opportunity by utilizing the mechanisms under the contract. Most contracts are written with obligations on the parties to deal with any potential variation or claim in a prospective manner. If the dispute is left unresolved until the end of the project, it will be more complex to demonstrate entitlement. Such complexity will increase the cost of resolving the matter.

Amicable settlements in the region are often based on verbal agreements. Requesting that the details be documented can be seen as a breach of good faith, jeopardising the settlement; without the documentation, the details of the settlement are unenforceable. What is the solution to this Catch-22?

SN: Win-Win settlement is always best documented, so as to protect both parties. The most essential element of any settlement is that it reflects trust between parties and maps a way forward. These are the hallmarks of good communication practices and working relationships.

JH-J: I’d add that, in most contracts, any agreement or settlement should be recorded in writing before either party takes any action on the agreement. Discussions between the parties regarding the details of the settlement can be verbal. But it is essential that the final agreement is recorded in writing by the relevant authorised person before any party takes any action. Any party making a request to record the agreement in writing is merely following the terms of the contract.