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Golden contracts? Let the Games begin

As Rio 2016 gets under way, the construction will not long have finished. What contract provisions are likely to be in place to ensure everything goes to plan?

The opening ceremony for the 31st Summer Olympic Games takes place in Rio de Janeiro tonight and, according to reports, several of its construction projects are still on the last lap rather than being at the finish line.

At this point in time, it would be unfair to speculate on the potential causes of the problems Rio appears to have had in getting its venues ready.

These games are certainly not the first major sporting event to have encountered construction problems, however, and in their contractual arrangements with contractors and suppliers, host cities and organising committees will typically use various mechanisms to procure successful and timely delivery of their infrastructure and facilities to a ’Games-ready’ state.

Race against time

The key issue is time. Organisers need to determine at an early stage the most appropriate procurement routes.

For example, specialist items and materials such as the athletics track surface may only be capable of being sourced from a single supplier.

In such instances, organisers will often seek to enter into separate supply contracts for the specific items or materials to have more security that will be available to be handed over to the relevant contractor.

While construction contracts will generally require the contractor to compensate the client at a pre-agreed rate for late completion, this is simply not an adequate remedy, in itself, for organisers of major sporting events. Delay is not an option.

Preventative measures, such as early warning mechanisms (which users of NEC3 contracts will be familiar with), step-in rights, and acceleration clauses are therefore usually included in contracts as an attempt to deal with problems when they arise.

Allowing for variations

Problems can of course lead to disputes but again contracts ought to be set up in such a way as to enable swift resolution.

As a minimum, there ought to be an obligation proactively requiring both parties to attempt to resolve a dispute at operational level, which failing, the dispute would then be referred promptly to senior representatives of each party.

A requirement for parties to refer disputes to dispute boards containing pre-selected independent construction professionals with major projects experience is also common.

While the requirements for the construction of competition venues and other key facilities will usually be established well in advance, that will not be the case for the overlay.

“Due to the complexities involved in procuring a substantial number of overlay packages, there will often be quite a delay between the letting of an overlay contract and it being performed”

The overlay includes all of the temporary structures and facilities required for the events such as seating, toilets, and portable cabins. The confirmed requirements for this will not be known until much closer to the start of the events and at a point where there is more clarity on certain unknowns such as available budget, level of ticket sales, and the requirements of the host broadcaster.

Due to the complexities involved in procuring a substantial number of overlay packages, there will often be quite a delay between the letting of an overlay contract and it being performed.

It is therefore essential, particularly for the overlay packages which are set up largely as supply contracts for quantities of particular components, that the organisers build as much flexibility for instructing variations into their contracts as they can.

Change control

Comprehensive change control provisions are indeed vital for both contracting parties.

In the last few weeks before competition begins, multiple contractors will be working side by side on the same venues, the pace of work will be increasing, and it is inevitable that a number of issues will crop up.

From the organiser’s perspective, changes need to be capable of being quickly and easily instructed.

“The main problems with change control occur due to a failure to adhere to the proper processes and documentation requirements”

Unsurprisingly though, the main problems with change control occur due to a failure to adhere to the proper processes and documentation requirements.

This will often be an issue post-competition where contractors seek extra payment from an organiser who may already have substantially eaten into its contingency funding.

For now though, let’s hope the only contractual worries organisers have are whether athletes will adhere to the Olympic oath of fair play, and that images of the

Olympic flame burning brightly and scoreboards displaying world records will replace those of exposed wiring and leaking walls as the defining images of this Olympics.

Christopher Dickson is a senior associate at CMS

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