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Wembley row stuck in past

AGENDA

In just over three months' time Multiplex, the firm behind the most famous building scheme in the country, and Cleveland Bridge, its former steelwork subcontractor, will enter the Technology and Construction Court to begin a legal battle with over £50 million at stake. But, writes David Rogers, this sort of bust-up is becoming a thing of the past

THE WEMBLEY Stadium dispute is the biggest and most bitter row to hit construction for many years.

From the public standpoint it is yet another shameful example of the construction industry running late and over-budget while trying to blame poor performance on somebody else. After years of talk and effort to reform construction this should not be happening.

So where did it all go wrong?

As the boss of a rival building firm that looked into the stadium contract Multiplex eventually took on remarked this week: 'There is no doubt in my mind that if this wasn't Wembley, the whole thing would have been sorted out without going to court.

'This sort of case is happening less and less in construction. But when it happens, it happens big. With a high-profile job like Wembley and a lump sum at stake, the shit hits the fan. It goes very public and people take entrenched positions.' The dispute has become increasingly bitter and insiders at both firms are privately admitting it is unlikely to be resolved on the steps of the High Court. The lawyers will have their day in court ? four weeks, to be precise.

Just how acrimonious the whole thing has become is clear from the latest court documents to be presented.

Cleveland Bridge has accused Multiplex of implementing a strategy ? codenamed 'Armageddon' ? designed to sink it.

This is one heck of an allegation and probably wasn't what Sir Michael Latham and Sir John Egan had in mind when the pair set out their blueprints for reform in the construction industry.

Their reports, which emerged in 1994 and 1999 respectively, amounted to a hatful of recommendations about ways contractors could help themselves and improve their efficiency. One of the ideas both came out with was, put simply, to use the courts less and less.

The idea was that 'partnering', 'talking more', 'working together', 'stakeholder relationships' and so on would remove the need to call in the lawyers every time something on a job went wrong.

This was fine when it came to client-contractor relationships but things were a little less clear when it came down to the main contractor-subcontractor relationship of the sort struck up between Multiplex and Cleveland Bridge back in 2002.

Graham Watts, chief executive of the Construction Industry Council, said: 'The way Wembley was procured, hopefully, we won't see again. As an industry I think we've gone beyond the point where those circumstances can be replicated.' Replacing the Rethinking Construction and Construction Best Practice initiatives, industry reform body Constructing Excellence was set up in 2003, one of a welter of such organisations that seemed to pop up every week following the Egan Report.

Constructing Excellence deputy chief executive Don Ward said: 'Certain risks can be predicted and we are surely better off planning how to avoid incidents and claims in the first place than simply reviewing the way we cover ourselves after the event.

'Better risk management is required. This depends greatly on better integration of project teams and collaboration between team members. Teams need to sit down in the pre-planning stage of a project, review working methods and processes, share information and experiences openly and transparently and agree who is best placed to manage the residual risks that cannot be designed or managed out.' The role of bodies like Constructing Excellence, he said, was '?to draw the attention of the industry to how collaborative working reduces risks and increases profits'.

The first boss of Constructing Excellence, Dennis Lenard, ended his two-year stint in the role at the end of August. He is now back in his home country of Australia, but this week gave his own views on whether the Multiplex and Cleveland Bridge dispute was a sign of things to come.

Speaking from Sydney, he said: 'I really think this dispute is just a one-off and was caused by the dramatic rise in steel prices because of the demand from China.

'Partnering in Australia has been around for longer and there is less reliance on contractual forms. In Australia there is a tendency to sit around a table and thrash things out but in the UK firms still rely on contracts. Litigation is more prevalent in the UK.' UK companies, he reckons, still have to get used to the idea of partnering.

He added: 'Partnering is still new in the UK but it has flourished. In all my dealings with medium-sized and larger contractors over there relationships with clients and the supply chain were really on the up and good processes are starting to come through.

'Partnering is definitely the way to go and the UK is leading in its development particularly now with the advent of frameworks, which really is partnering over a longer duration and transcends project timelines.' Indeed, the sort of contracts that firms are now signing up to are a world away from the kind of contract drawn up at Wembley.

Mr Lenard added: 'With respect to Wembley, there are large sums of money involved, an overheated construction market and a worldwide shortage of steel.

These three things provided the impetus for the drama to follow. In lump sum contracts risk is transferred as far as possible down the supply chain and the only mechanisms for solving disputes are contractual ? and more likely to lead to litigation.

'I don't believe any complex project should ever be undertaken on a lump sum basis.' Most seem to agree that the new approach to contractual relationships has given rise to fewer legal bustups. One building boss said: 'Disputes are fizzling out because of the deals we're now signing. Wembley was lump sum and under lump sum, once the money runs out, that's when the problems start. The only comparable jobs are PFI schemes.

'But a lot of the deals we sign now are long-term or frameworks, where the idea is that everybody works together. There is more likelihood of success.' Mr Lenard's successor at Constructing Excellence, Bob White, who is also the chairman of Mace, reckons the key to avoiding litigation is implementing good management processes. He said: 'The construction industry has always been a collaborative one but we are beginning to learn how better to manage. The problem at Wembley would seem to be that no one has managed that process that well.

'Partnering is about doing the simple things better, it's about accepting that contractors should be involved in projects earlier and getting the management process right in order to pull the team together early and involve specialist at the right stage.' But Mr White stresses that the role of the client has become more important in recent years.

He said: 'Not all lump sum jobs have to go wrong. If it does go wrong, it's the wrong lump sum.

'Look at T5 and the way that's gone. Compare it to Wembley. If the client on Wembley had been better advised, they would have got a better project out of it and I don't think we would have seen the problems we have with the supply chain.

'The client has to make early decisions. A client that doesn't know what it's doing can let things get out of hand. I think that at Wembley, the client was probably happy to just to have someone on board.' There is undoubtedly more use of informal dispute resolution in the industry today. But it's difficult to see how partnering, for example, could ever have worked on a fixed price job like Wembley. As soon as the money runs out, the writs fly. In the end, the dispute between Multiplex and Cleveland Bridge is a good old-fashioned ding-dong.