Front-end lawyers critical to driving project success

Businesses engaged in major construction projects face many challenges, which makes it vital to seek advice from the outset from legal counsel experienced in evaluating and negotiating the appropriate balance of risk. This is particularly relevant in the case of projects procured through a competitive procedure as experienced advisers will be well-positioned to assess the appetite for risk amongst the contractor community likely to bid for the project.

Allocating too much risk to the contractor could impact the number of bidders interested in the contract and store up problems for the execution stage. A contractor which is facing huge losses may choose to exit the project. It is also not unheard of for contractors to enter insolvency primarily as a result of losses incurred on a single project. However, neither of these scenarios are a good result for the procurer, which ultimately wants the project completed on time. 

A good front-end counsel will know the market and its players and be able to advise on an allocation of risk that protects the procurer’s interests whilst also ensuring that the contractor community are willing to bid for the project.

Contractors bidding for work will usually seek to negotiate the terms and conditions to achieve a more favourable allocation of risk. This is where front-end counsel acting for the contractors also have a key role to play. The task is not only to seek to amend contractual clauses to reallocate risk in a way that is acceptable to both parties, but to ensure that the contractor is as informed and well prepared as possible to comply with the contract should it be successful with its bid. This is particularly important for contracts where few or even no deviations are accepted by the procurer.

As a general rule, the earlier front-end counsel are involved the better, whether they are acting for the procurer or a bidding contractor. This allows all important decisions to be taken with the benefit of counsel input, from the choice of procurement strategy and contracting model to the approach taken to contractual clarifications and deviations. 

In our experience, during the contract negotiation process it is also crucially important for the team acting for the contractor not only to have the right combination of legal, commercial and technical expertise, but also the right representation from the teams who will actually be tasked with delivering the contract. Too often we see the wrong balance between commercial representatives who are incentivised to get the project through the door and the delivery team who will need to perform the contract, leading to contracts which store up problems that the delivery team cannot properly manage. 

Claims procedures

Most construction contracts contain procedures which must be followed wherever a contractor wishes to take advantage of a contractual entitlement, whether that be to an extension of time, payment of additional costs, force majeure relief, indemnification etc. In some contracts, procedures are also in place for procurers to follow before certain entitlements can be claimed. However, this is still very much the minority.

These procedures usually require the contractor to provide a combination of notices and detailed claim reports which are often required to contain a lot of information, from the nature of the event triggering the entitlement, the predicted duration and impact to the counter-measures and mitigations that the contractor will be undertaking.

It is now very common to provide time limits for the submission of the notices and claim reports to the procurer, with the contractor losing its rights if it fails to comply to any extent. This is not without justification as timely notice will enable procurers to plan and manage their response to the relevant event with a view to preventing or reducing the impact on the project. However, if applied strictly, they can have very harsh outcomes for contractors.

This means that claims procedures in a contract can have a huge bearing, whether positive or negative, on whether a contractor makes a profit or a loss on a project. Reviewing and negotiating these procedures for a contractor requires counsel with the necessary experience of what it takes to bring successful claims under construction contracts. Crucially, they will know the pitfalls to avoid and the areas to focus on to make the procedure more feasible for the contractor to comply with in the long run.

The project counsel’s skillset should also be deployed very soon after the contract is awarded to ensure that the contractor’s implementation team is fully aware of the claims procedure and how to comply with it. This could be the most important aspect of the contract familiarisation training: it can be the difference between making successful claims and having claims rejected and losing contractual entitlements.

The dispute resolution clause

Finally, the dispute resolution mechanism is often one of the most overlooked parts of a construction contract during negotiation, yet it can have a profound impact on how disputes are managed and resolved. A poorly drafted clause can lead to jurisdictional challenges, procedural delays, significant cost implications, and enforcement challenges. 

Front-end counsel should ensure that the clause is clear, enforceable, and aligned with the parties’ commercial objectives. This includes deciding: 

• whether the disputes will be resolved through litigation in local courts, arbitration under a recognised set of rules, such as the International Chamber of Commerce (ICC), the Saudi Center for Commercial Arbitration (SCCA), or the London Court of International Arbitration (LCIA), or a tiered approach involving negotiation and mediation before formal proceedings;
• the choice of seat for arbitration and governing law, which can influence procedural rules, enforceability of awards, and neutrality;
• the need for a specialised panel. For highly technical projects, it is necessary to consider whether expert determination or dispute boards should be incorporated to resolve issues quickly during the project lifecycle. Due consideration must also be given to whether these specialised panels are likely to assist parties in jurisdictions such as the Middle East;
• the number of arbitrators, which is a critical element of the dispute resolution clause because it directly affects cost, speed, and the quality of decision-making. Front-end counsel should offer an option that takes into account project size and complexity, dispute value thresholds, as well as budget and time constraints. 

Counsel should also anticipate enforcement challenges, particularly for cross-border projects, and ensure that the chosen mechanism is compatible with international enforcement regimes such as the New York Convention. 

Providing clarity on timeframes, cost allocation, and confidentiality provisions can also prevent disputes about the dispute resolution process itself.

For front-end counsel who do not regularly handle construction disputes, it is worthwhile involving a disputes specialist in the drafting, review and negotiation of the dispute resolution mechanism. Disputes counsel not only bring specialist legal knowledge to the table, but equally importantly they bring the benefit of their experience handling disputes. This places them in prime position to advise on what works best in practice and not just in theory.