Global Legal Issues for Engineers and Constructors

When performing engineering and construction (E&C) throughout the world E&C personnel need to be aware of the differences in legal systems and how contracts are enforced in different countries. This paper provides information on some of the international legal conventions, regional legal issues, and comparative legal systems. Next the paper addresses international engineering and construction contracts by providing a discussion on the clauses that could differ in contracts throughout the world and which clauses are important to include in international contracts. Specific contract clauses are examined in relation to how their inclusion or exclusion might impact global engineering and construction projects. The next section presents issues related to claims and change orders along with a brief discussion of dispute resolution techniques including international arbitration and contract clauses related to dispute resolution techniques. Anticorruption legislation is mentioned along with kidnapping and ransom insurance because both of these issues are increasing in importance in the global E&C arena. Liability issues that firms might face in the global E&C marketplace are explained along with risks associated with currency valuations and local labor conditions. A table of clauses pertinent to global E&C contracts is provided to help firms prepare for projects in foreign nations.     

Legal Issues Associated with Emergent Actor Roles in Innovative U.K. Procurement: Prime Contracting Case Study

Pressure for reform in U.K. construction procurement has led to a move toward relational contracting. Long-term partnerships between clients and construction service providers have enabled traditional construction roles to change radically and the reconfiguration of relationships between these emergent actors. Social network analysis was used to examine the new roles and relationships under an innovative procurement strategy known as prime contracting. This public sector procurement approach involved the introduction of the role of cluster leader combining the skills and knowledge traditionally provided by the architect, the chartered quantity surveyor, and the construction manager. The role of cluster leader was adopted by specialist contractors using existing staff and in the absence of dedicated training. The role was voluntary, however, those performing it were obliged to absorb liabilities relating to design information produced by other actors, financial management on behalf of the prime contractor, and responsibility for the management of the contract period, upon which the contract between the employer and the prime contractor was based. The additional responsibilities associated with the role of cluster leader were accepted without financial compensation, on the basis of maintaining goodwill with the prime contractor and employer. Liabilities arise for the firms and potentially individuals within those firms. There are also concerns about the likelihood of appropriate professional indemnity insurance coverage being available to cluster leaders.     

Issues in Professional Construction Management

The use of professional construction management has increased rapidly since the introduction of this form of organization in the early 1960's. Despite this widespread use questions concerning the scope, definition, and differences in implementation of this project delivery system remain. An ASCE technical committee has investigated these questions and disseminated information concerning professional construction management through technical sessions at ASCE meetings, published papers, and a specialty conference. This paper summarizes the results of these activities and provides references of the literature available regarding the development and use of professional construction management.     

Legal Risks Faced by Foreign Architectural, Engineering, and Construction Firms in China

The extensive opportunities in China’s construction industry are expected to attract many foreign architectural, engineering, and construction (AEC) firms to her shores. However, these foreign firms may face many legal risks and obstacles, mainly because of the differences in culture and operating environment from their home countries. This study investigates the legal risks that foreign AEC firms encounter when operating in China, and how these risks are managed. Data were collected from 21 foreign (non-Chinese) AEC professionals who have extensive experience in China. Legal risks faced by foreign AEC firms in China include: difficulty in complying with the innumerable laws and regulations at the central, provincial, and local levels of the government; keeping up with new laws and regulations that are constantly being enacted; seeming reluctance of Chinese business associates to enter into binding contracts; and lack of sanctity of contracts and contractual obligations not being carried out fully, leading to disputes. Based on the research findings, a framework for managing legal risks is proposed for use by industry practitioners. The framework recommends to practitioners several measures to manage the legal risks. These include relationship-based strategies like establishing close relationships with the Chinese government officials and Chinese business associates and careful selection of Chinese business partners. It is recommended that foreign AEC professionals adopt the mindset that in China, the contact is to be continuously negotiated and reinterpreted. To achieve this, industry practitioners should provide a substantial contingency sum. It is also important to emplace permanent staff in China so that they can understand the local environment and monitor the changes taking place there.     

Relief from Bid Mistakes

Contractor mistakes in the bidding of construction projects are not unusual occurrences and can delay the planned starting date of projects. It is important that mistakes be handled expeditiously and correctly. This paper analyzes several important court decisions related to bid mistakes to determine the inquiries an appellate court will ask and how it will react to the answers to its inquiries. The decision-making process is formulated in a flowchart format that models the judicial decision-making process. The flowchart can be used to analyze other disputes. Based on the analysis of court decisions, the judicial decision-making process was modeled and applied to a case study example. The outcome of the inquiry analysis was identical to that of the judicial decision.     

Legal Aspects of Information and Communication Technologies Implementation in the Turkish Construction Industry: Applicability of eLEGAL Framework

With increasing awareness of gains and importance of the strategic use of information and communication technologies (ICTs), the implementation rate of ICTs in the construction sector is increasing. However, these technologies have not been covered by legal and contractual practices. The industry needs to implement application frameworks and legal restructuring of the existing related laws and regulations to use ICT in a legal and contractually valid environment. The EU-funded eLEGAL project, which defined a legal framework for ICT uptake in construction, is selected as a model project to address legal and contractual issues regarding ICT use in the Turkish construction industry. The applicability of this project’s results are discussed by using real cases and defining the barriers, opportunities, methods, and tools to use ICT in a legally admissible manner in the Turkish construction industry.     

Legal Framework for Alternative Dispute Resolution: Examination of the Singapore National Legal System for Arbitration

Effectiveness of any alternative dispute resolution (ADR) method depends on the national legal system to which it is subjected. In Singapore, the increasing growth in the use of ADR methods may be adduced to developments in the Singapore legal environment. This paper reviews the characteristics of the Singapore national legal system for arbitration. It examines how the legal system facilitates effective use of ADR. By its features, the Singapore national legal system ensures parties’ autonomy but deters parties from taking opportunistic advantage of the voluntary nature of ADR. It enables procedural flexibility, and confidentiality of arbitration proceedings. It insulates the arbitration process from intervention from the Singapore courts and from corruption; and it provides maximum judicial support in the arbitral process. Hence, it ensures that disputes can be brought to a conclusion within a reasonable amount of time, at a reasonable cost, as well as preserving business relationships. The Singapore legal system insures the integrity of arbitration and the independence of arbitrators and arbitral institutions by immunity provisions. In addition, the legal system enhances the use of mediation and conciliation in a sequential tier with arbitration by providing a time limit for mediation or conciliation to terminate should they fail to produce a mutually acceptable settlement. In Singapore, the court system is generally known to be efficient; hence, ADR faces the practical challenge of becoming lengthier than court proceedings. The continuing search for and use of expedited arbitration procedures by arbitral institutions such as the Singapore International Arbitration Centre should reduce this challenge. This paper provides useful information on how a national legal system may be designed to support the use of ADR methods and facilitate their effectiveness.     

Evaluation of Legal Risks for E-Commerce in Construction

E-commerce is steadily becoming a reality in the construction industry. However, despite the increasing rate of utilization by owners and contractors alike, the legal implications of using e-commerce in construction have not been studied in depth. This paper fills this gap in literature. It identifies and analyzes the different types of legal risks involved in the use of e-commerce in construction. It also outlines the risk that contractors and professionals may face in their e-commerce implementations. A classification of e-commerce legal risks is also introduced. The legal risks discussed include agency, jurisdiction, contract formation, validity and errors, authentication, attribution, nonrepudiation, privacy, conflict of laws, and conflict between law and technology.     

Minimizing Liability for Construction Accidents through Good Contracting

A serious injury or death of an employee or member of the public on a construction site poses a considerable risk to the construction industry professional. Whether resulting from an unsafe condition on the site or from the injured party’s own negligence, a lawsuit seeking a large award is likely to follow. While an architect or engineer with general inspection responsibilities over a construction project does not normally owe a duty of care to the contractor’s employees or the public, he or she may assume such a duty through contractual language or by exercising control over safety issues. With the unpredictability of juries and the ready availability of experts willing to testify that a construction industry professional was at fault, careful contract drafting becomes essential for protecting an organization and shifting the responsibility for site safety to those best able to control the risk. The design professional will wish to ensure that the contractor is fully responsible for site safety. The contractor, on the other hand, must be on guard against the assumption of responsibilities beyond that normally expected in the industry.     

Emergency Contracting Strategies for Federal Projects

During the past decade, government agencies have struggled to adequately respond to emergency events that require labor, materials, equipment, and services provided by construction contractors. In fact, the criticism directed at government agencies during their response to, and recovery after, recent events is a testament to the insufficient contracting strategies that were implemented. Countless media headlines highlighted the fragmented approach used to hire contractors expeditiously, and several agencies were criticized for their inconsistent contracting methods. As a result, a study was initiated to investigate the differences between normal federal contracting procedures, as outlined in the Federal Acquisition Regulation (FAR), and emergency acquisition procedures that are permitted by the FAR. The study found six examples of waivers to the usual regulations or expedited contracting techniques permitted by the FAR. Furthermore, the study highlighted five emergency contract strategies that are available to the Navy (as one example of a government agency with contracting authority) and may be available to other governmental contracting authorities as well. Consequently, the purpose of this paper is to identify emergency contract strategies that can be used by government agencies and to outline the criteria that must be met to use each strategy.     

Developing Case-Based Communities of Practice for Teaching the Legal Aspects of Construction: Lessons Learned in Taiwan

To enhance the learning for graduate students to understand legal issues and dispute resolution in the construction industry, students can be provided with a learning platform for exchanging and sharing knowledge and experience among students and experienced instructors. With the assistance of the Internet, construction law related experiences acquired from previous projects can be discussed and shared with students. This study utilizes the case-based communities of practice approach to capture and manage engineer experiences. Via the case-based communities of practice approach, students and instructors can exchange and share discussions and comments related to selected topics and cases. The proposed case-based communities of practice learning (CCPL) system was developed and demonstrated to be effective when applied to teach students about construction law at a university in Taiwan. Construction law related experiences can be taught and shared among students, thus enhancing students’ abilities to resolve problems and disputes related to construction law. The combined results of various case studies demonstrate that the application of the CCPL system to the legal aspects of construction courses offers an effective means of sharing practical legal knowledge and experience, especially among graduate students who lack previous legal experience.     

Lawyerization of the Engineering and Construction Industry

Lawyerization has become more and more prevalent in the engineering and construction industry. Some would argue the merits of firms’ retaining lawyers on staff as providing cost savings on projects through averting potential litigation. Others view lawyers as increasing project costs due to increased overhead. Therefore, it is important to understand the pros and cons of lawyerization as viewed by the contractor, designer, owner, manufacturer, and supplier. This paper discusses the current role of lawyers in the engineering and construction industry and examines the factors that contribute to the lawyerization of the industry.     

Reconstructing Cultures for Relational Contracting

Although previous research has pointed to potential performance gains through relational contracting (RC), reservations remain as to its value and viability. Even those who wish to use RC need guidelines for introducing it, especially where it clashes with prevalent project cultures. A study was launched from Hong Kong to identify the critical factors which promote RC and team building in the context of specific cultures. This paper consolidates the perceptions of 60 respondents to a questionnaire survey in Singapore, in relation to the hypothesized 24 factors facilitating RC, and 28 factors impeding/deterring RC. It indicates the evident readiness of the Singaporean contracting industry to embrace collaborative working practices. On the whole: (1) all the 24 factors facilitating RC, and 23 of the 28 factors deterring RC, are significant; (2) these two sets of factors could be represented by six and seven “broad factors,” respectively; and (3) except in a few cases, respondents from large and medium companies, as well as with and without experience in RC, have similar perceptions of the importance of different factors. It was perceived that trust should be at the core of RC approaches to construction procurement, but also seen that the current level of trust is low. Identifying the principal “facilitators” and “impediments”/ deterrents to RC, provides pointers to building relationally integrated teams to boost performance to much higher levels, as are now expected from the industry. The literature indicates that the outcome of the survey in Singapore reflects the trends in many countries that are moving toward RC. This research model and approach may be conveniently replicated in other contractual regimes, in order to reinforce these observations.     

International Construction Dispute Adjudication under International Federation of Consulting Engineers Conditions of Contract and the Dispute Adjudication Board

The role of institutional arbitration has become significantly less commercially viable in the international construction industry as a primary means of dispute resolution because of the uniqueness of the construction process. As a result, the construction industry has developed an innovative form of primary dispute adjudication called the Dispute Adjudication Board (DAB). This paper will show the need for an efficient dispute resolution process because of the globalization of the construction industry. It will focus on the standard contract forms of the Féderation Internationale des Ingénieures-Conseils (International Federation of Consulting Engineers) (FIDIC), which are widely used in international construction projects. The paper will then discuss recent developments in the FIDIC, including the development of the DAB to address the fundamental need for a commercially viable means of construction dispute adjudication.     

Characteristics of Contractor’s Liabilities for Defects and Defective Work in Korean Public Projects

Modern buildings and civil structures are complex undertakings and involve the use of a great variety of engineering methods and processes. Therefore most projects face the possibility of defects and defective work, which generally result in structures that cannot perform their originally intended roles. The characteristics of the contractor’s liabilities for defects are very controversial in Korea. There are two conflicting theories and one compromise between the two, concerning defect liabilities. One is liability in terms of the law, and the other is that in terms of the contract. These two kinds of liability are significantly different, varying in definition, scope of responsibility, period of responsibility, and other aspects. The purpose of this study is to suggest how to resolve potential disputes which might result from these differences through the analysis of current laws and their interpretation.     

Integrated Electronic Commerce Model for the Construction Industry

The construction industry has been relentlessly searching for technology solutions to enhance its productivity and efficiency. This paper presents an investigation that was conducted to obtain an overview of the current situation of electronic commerce applications using Internet and web-based technologies for the construction industry. A conceptual model named Integrated Electronic Commerce Model for the construction industry is proposed in this paper. Based on this model, construction project scheduling process and its related business activities at the industry and enterprise levels are analyzed to compare the interaction and integration of construction processes, in the electronic commerce environment versus those in the traditional environment.     

Cultural Considerations in International Construction Contracts

International construction projects involve multinational participants from different political, legal, economic, and cultural backgrounds. As one of the major issues affecting the management of international construction projects, culture deserves wide research. This paper aims to establish a valid groundwork for further research on the impact of cultural issues on contractual arrangements; conflict causation, and the selection of dispute resolution mechanisms for international construction projects. The paper reviews the characteristics of international construction activities and discusses the cultural context. It sets the research background for disseminating the findings of two surveys, carried out in Hong Kong and in London and Sydney. The study identifies the important features expected for the contract of international construction projects and ascertains their significance to further in-depth research.     

Perceptions of Contractual Risk Allocation in Construction Supply Chains

Common perceptions of contractual risk allocation are the basis of a harmonious, effective and efficient construction project. This paper explores the extent to which common perceptions of risk allocation exist along the construction supply chain. The results of a survey indicate that differing perceptions are worryingly high in all relationships, but particularly further down the supply chain. The paper indicates the relationships in which this is most likely to occur and the types of risk it is most likely to affect. The results provide important lessons for project managers, negotiators and contract drafters. In particular, by providing a better understanding of where and how differences in risk perceptions are likely to emerge, they help those negotiating and drafting contracts focus their energies more effectively to help minimize the potential for unnecessary loss and dispute. Finally, our results indicate that the key to better managing perceptions of risk is fundamentally one of communication, consultation and involvement in contractual decision-making. The key point is that contractual allocations of risk have little meaning if they are separated from the social and behavioral context in which risk is experienced by those involved in a project.     

Enablers That Help Foreign Architectural, Engineering, and Construction Firms Win Construction Contracts in China

With China’s fast economic growth and entry into the World Trade Organization (WTO), more foreign architectural, engineering, and construction (AEC) firms are expected to venture into this huge and attractive market. This paper explores the important strategies to help foreign AEC firms clinch construction projects in China. Using a questionnaire survey approach complemented by in-depth interviews, it was found that firms need to pay more attention to the market and working conditions in China and to strengthen their own capabilities. To win projects in China, foreign AEC firms should also be able to offer project financing services. The findings are useful to foreign AEC firms because it may help them win projects in the Chinese construction industry.     

Legal Requirements and Challenges for e-Business within the Single Electronic European Market

The advancements in Information and Communication Technologies have not been fully exploited by industries despite the great potential they offer. A major initiative by the European Commission to establish a single electronic European market (SEEM) will provide a platform for e-Business on a pan European level. Legal issues represent one of the top concerns for the SEEM, which is high on the agenda of the European Union (EU) policies and strategies. This paper summarizes some of the key research findings of the EU funded SEEMseed project (Study, Evaluate, and Explore in the Domain of the Single Electronic European Market 2006), based on the four legal studies conducted in the project. It first presents the legal requirements of the SEEM through the e-Business life cycle, and then reveals the major legal barriers and possible solutions in the EU for the development of pan European e-Business platforms, based on an extensive pan European stakeholder survey.