Construction is an altogether more complex process than it used to be – and this raises tricky questions about how firms should treat each other
According to Professor John Uff QC, a code of ethical conduct should be drawn up by the Society of Construction Law. The aim would be to say how construction professionals should behave towards each other in the tendering, negotiating and administration of contracts, and at all stages of claims and disputes.

Uff developed this suggestion in his recent Michael Brown memorial lecture at King's College London. He concluded by saying: "Professional ethics have an increasingly important role to play in the proper running and well-being of the construction process at all stages … An ethical approach may hold the key to a number of problems that have beset the industry for many years, and may lead to a fairer and more prosperous future." Uff brings to this suggestion his unique blend of experience acquired in his professional life as an engineer, barrister, arbitrator and professor of construction law. He focuses on the unusually complex multidisciplinary involvement of those in the construction process, and on the need for:

  • Transparency and full disclosure in the tendering and claims processes;

  • A clear statement of the ground rules that should mark dealings during the construction process.

The need for such ground rules has been highlighted by the growth of detailed procedures governing the tendering process, the negotiation of claims and the resolution of disputes.

Is the professor right?

Cost and conflict
Let's turn the spotlight on two features of the construction process: cost and conflict. These were the two features considered by the Latham report, which did so much to set the scene for the Construction Act and the introduction of adjudication and improvements in the payment regime.

The Latham report identified many of the characteristics of construction that caused it to be ridden by disputes and cost overruns. These problems have been alleviated by what has followed but much remains to be done.

The overall cost of a project is largely determined before and during the tendering process. Much of any increase in cost arises from information gaps that lead to delay, disruption, excessive engineering, erroneous construction and a failure to identify risks before they occur. These problems would often be eliminated if the scope of the work, the allocation of risk and the breakdown of costs were clearly identified in the tendering process and in the contract documents.

Some of these problems are addressed in the statutory rules that regulate the procurement process, but these are primarily intended to allow cross-border tendering to take place within the European Union without undue discrimination against foreign tenderers. They provide little guidance to those designing a scheme and drafting the tendering information as to what core information should be provided. Nor do they clearly indicate where the boundary should be drawn between what should be revealed and what may be withheld on grounds of commercial prudence and confidentiality.

The fact is that employers tend to provide too little information about projects, and tenderers too little information about how their tenders have been costed. Then there is the unwillingness of designers and tenderers to warn the opposite side about problems and dangers they have perceived in the construction process. Indeed, the law is still unclear as to whether, and if so when, a professional has any duty to warn others of any physical and economic pitfalls in the construction process.

Conflict arises when expectations are not realised. Clients have expectations as to how long the project will take to build and how much they will have to pay for it. Contractors have expectations as to how much it will cost and what profit they will earn. Professionals have expectations as to the size of their fee, what the end result should look like, how it should perform and, in a claim situation, what information any claim should be supported by.

A conflict of interest or a perceived conflict of interest does not necessarily lead to unprofessional conduct. Chinese walls can be constructed, but, as the ancient sage once pointed out, these are often made of rice paper …

Conflict is heightened by attitudes of concealment. People who are at risk of being blamed will hold back information because they do not want to hand to others a rod with which they can be beaten.

Too many hats
It seems that many of these problems arise because professional responsibilities have become blurred as the construction process has become more complicated. Contractors have become designers and project managers as well as remaining contractors. Quantity surveyors have become cost and project consultants as well as remaining number crunchers. And with the growth of adjudication, everyone has become an advocate, as well as remaining either a contractor or an employer or a supervisor.

Construction can learn from other commercial fields. A glaringly obvious – but obviously instructive – example is provided by accountants. In particular, how did Arthur Andersen fail to warn of the collapse of Enron? How did the largest firm of accountants the world has ever known virtually disappear overnight? One of the reasons was that Arthur Andersen was providing auditing services to huge companies for whom they were also providing consultancy services. The watchdog was keeping an eye on the practices and commercial policies that it had helped to devise and implement. Indeed, the consultants and auditors involved were probably not dishonest but were unwittingly caught up in a fraudulent culture in a way that precluded full and sufficient auditing to take place.

Modern construction processes throw up marked conflicts and potential conflicts of interest. Project management and cost consultancy are two areas where conflicts can arise. There are many others, particularly in PFI work, where the contractor has a stake in the entity being constructed. Further examples occur when the principal consultant is employed by the employer, or when the contractor has undertaken much of the design. The complexity of construction, of the tendering process and of contractual relationships generally has thrown up a wide range of potential conflicts of interest that were never known previously. A conflict of interest or a perceived conflict of interest does not necessarily lead to unprofessional conduct. Chinese walls can be constructed but, as the ancient sage once pointed out, these are often made of rice paper. Moreover, a conflict can be perceived even if it is not a real conflict and false perceptions can lead to the withholding of information and co-operation, with a consequent deterioration of a contractual relationship.

The law relating to conflicts of interest has developed rapidly. Courts, tribunals and expert witnesses must now decline to participate in a much wider range of circumstances than hitherto. This developing law is well enshrined in advice given to adjudicators by the Construction Umbrella Bodies Adjudication Task Group, which states: "If you are aware of any connection, however remote, that you have or have had with either party, or of any matter which you might see as being a conflict of interests, notify the parties and consider refusing the appointment.

If anything comes to light after you have been appointed, ask the parties if they wish you to continue; and, if necessary, resign."

Audience participation
The Society of Construction Law has now embarked on the task set by Professor Uff. It must first decide whether a set of ground rules should be drafted and, if so, what their shape and general content should be. It must also consider whether the rules that are produced should have legal force and, if so, how this could be achieved. Alternatively, it could decide that the rules should be promulgated as a code of practice or industry standard, or merely published as a best practice guide.

A further potential task will be to seek to persuade professional bodies and trade associations to insert the guidance into their codes of conduct. Once these decisions have been taken, the difficult task of drafting the guidance must be undertaken. The society has set up four task groups to undertake the first step; they cover research, issues, definitions and options, and they are to report by next spring. One matter being considered is whether some form of registration as a construction professional is desirable and what form of sanction should exist for those who fail to follow the ethical code that is produced.