2014 predictions: Wishful thinking

Because making predictions is a mug’s game, in my first column of 2013 I asked the construction industry’s fairy godmother to grant us 10 wishes for the year ahead. Sad to report, she seems to have declined to use her powers to benefit the industry - or maybe she just disagrees with us about the future direction of it …

We wished for a happy and prosperous subcontracting industry. She has given us an improving economic outlook (even if it is based on a house-price bubble and cheap credit) but, unfortunately, improvements in the sector have squeezed cash flows still further and once proud companies continue to tumble.

We pleaded for less red tape. And she has given us the Strategic Forum’s draft Construction Supply Chain Charter with commitments “not deliberately [to] delay or unreasonably withhold payment” and to be “transparent, honest and collaborative … when resolving differences and disputes”. The contracting industry will sign to pre-qualify for central government contracts. But active monitoring in use by way of KPIs? We pleaded last time that our fairy godmother should spread transparency and honesty and expose, name and shame those involved in hidden discounting, rebates, backhanders and other cheats and tricks. Does she really think this will do it for us?

Though we pleaded for less red tape, why get rid of site waste management plans just when they were doing some good?

And though we pleaded for less red tape, why get rid of site waste management plans just when they were doing some good - as the industry agreed?

We asked that provisional sums go up in a puff of smoke - or at the very least that quantity surveyors should explain what they are, or go up in a puff of smoke too. Sadly, there’s no evidence of this - either of declining use of provisional sums or spontaneously combusting quantity surveyors - and we are boring ourselves on the subject. As with letters of intent, there are only so many times you can say the same thing.

So should we go back to predictions after all, on the basis that we might do less damage if we do not invoke the construction industry’s fairy godmother? Here is a mixture of aspirations and predictions for the industry in 2014 …

• That the rather low level of new initiatives, new cases and new law that we saw in 2013 continues. Fewer initiatives, and more action. The industry working, not pontificating. And less time spent endlessly trying to keep up to date …
• That the industry realises that BIM is neither “risk shifting and we all know it and it will bomb”, as Tony Bingham predicted in these pages (22 November 2013), nor an excuse for endless rewriting of construction contracts. BIM is a tool that enables design clashes to be identified earlier, when they can be remedied more cheaply. It is proving its worth on those projects where clients have understood its benefit, pushed it but not expected it to change the world.
• Parkwood Leisure Limited vs Laing O’Rourke Wales and West Limited told us that collateral warranties can be “construction contracts” with rights to adjudication. Some misguided lawyers have argued that we should use third party rights and not collateral warranties to avoid this. There may be many arguments for using third party rights, but this is not one of them: if a collateral warranty that is a separate contract can be a “construction contract”, how can third party rights that are part of a “construction contract” not be? No more Building columns on this subject …
• That we avoid a torrent of cases about penalty clauses following Cavendish Square Holdings BV vs El Makdessi in the Court of Appeal. The industry makes “a genuine pre-estimate of loss” in calculating liquidated damages (LADs). It does not want to apply four-fold tests involving subjective judgments as to whether LADs are “commercially justified”; whether they are “extravagant or oppressive”; whether the “pre-dominant purpose” is to deter breach; and whether they were “negotiated on a level playing field”. It may be endless fun for lawyers but how can anyone else hope to know what to do?
• And can we hope that someone will pick up on Mr Justice Ramsey’s helpful hint in Liberty Mercian vs Cuddy Civil Engineering Limited that he might consider specific performance of a continuing obligation to deliver collateral warranties? A discretionary remedy, OK, but how wonderful would that be?

Ann Minogue is a partner in Macfarlanes