The Panama Papers should serve as a wake-up call for the industry and how it treats data. It’s time for contract drafting to move into the 21st century
In one of his frequent efforts to keep a lid on things, Sir Humphrey Appleby drily remarked to the Minister that the Official Secrets Act was to protect the officials, not the secrets. Fast forward 30 years to the Panama Papers, the recent data leak from the law firm Mossack Fonseca, and it becomes clear that it is the data that is vulnerable and the people it concerns are exposed as a result.
While the Panama Papers relate to the tax affairs of those people, the leak of the papers should serve as a wake-up call for the construction industry and how it treats data.
The entry point for data on most construction projects is the increasingly common non-disclosure agreement (NDA). The most successful of these work on a mutual basis where both sides, client and supply chain, undertake to protect the other’s confidential information as if it was their own. This reflects modern business where all concerned have intellectual property rights that they rightly wish to protect. Where an NDA is set up to work on a mutual basis, it tends to focus on the process of protecting the data, rather than the remedies available to an injured party if it is wrongly disclosed.
The provisions in the NDA are usually mirrored in the related contracts subsequently signed. it is worrying that the drafting does not always reflect our digital age
Conversely, where an NDA operates on a one-way basis, it tends to focus on the remedies available to the injured party and, since these are drafted by the party wanting to protect its data, they will often be backed up by an indemnity. While it is only right and proper that a party should look to protect its data, it is worth noting that an unauthorized disclosure of data is a breach that lets the genie out of the bottle – yes, there might be damages or an injunction but there is no way of putting the lid back on the data.
The provisions in the NDA are usually mirrored in the related construction contracts that are subsequently signed and it is worrying that the drafting does not always reflect our digital age. It is not unusual to see an obligation on someone receiving confidential information to keep a list of all locations where the data is held and while it may be possible to identify a precise location for the cloud, what is the real benefit of that? Similarly, there are still obligations to keep the data in a location that is locked at all times. True, it may be possible to describe parts of the cloud as being locked but presumably the level of encryption is a more helpful requirement today.
As well as the data that is protected on any given project, there is a huge amount of data that is generated throughout the contract that should be considered as a valuable resource. How often is this collected and used? Typically, the data is only analyzed when a project goes wrong and teams of claims professional and lawyers work through the information, to establish or excuse fault. There has been innovation in this area, in that the data is digitally analyzed by predictive coding, a process of tagging data items that an algorithm suggests is relevant to the dispute.
But what is made of the good data on a project and how is that used to improve the next project? There is the “lessons learnt” exercise conducted at the end of a project but that tends to focus on what did not go well and the usual output is often a piece of drafting anticipating an actual or perceived problem that goes into the next project.
I do not recall a meltdown in the digital world when the calendar flipped over into the year 2000. Yet, 16 years on, I still see the occasional ‘date recognition’ clause
My favorite example of that is a “millennium bug” or “Y2K” clause – I may have missed it, but I do not recall a meltdown in the digital world when the calendar flipped over into the year 2000. Yet, 16 years on, I still see the occasional “date recognition” clause presumably intended to protect against a problem “just in case”.
So, what other use can be made of the data? We are now in an age where data analytics can be used to process the data generated on a project, allowing everyone to make better business decisions. It can, for example, be used to predict the risks of late delivery on a project, looking at factors such as availability of labour and delivery time for materials. It can even be applied to the construction contracts themselves – take the simple example of signing contracts where many businesses have procurement systems that prevent a project being started until the contract is signed.
The quickest way of signing a contract is electronically, particularly where the parties are based in different countries, but some will say wet ink signing is safer, guarding against feared procedural shortcomings. Analyzing the data can reveal how long it took to negotiate and sign the contract and the parties may prefer to jettison “just in case” clauses and adopt electronic signing, deciding that saved time is the most precious commodity.
Michael Conroy Harris is a construction specialist at Eversheds