Sector focus: In good company
16 February 2004
In the second of a brand new series looking at key clients, Jodi Bartle asks top in-house construction lawyers for their views on the sector
The rapid changes to London’s skyline and docks are a reminder of how quickly the city keeps on growing. The changing infrastructure owes much to those who manage the less visible parts of the process – those who construct the contracts, oversee the projects and build partnerships between the diverse parties of the construction industry. Enter the in-house lawyers. The lawyers at the six construction companies profiled here agree unanimously on the attractions of the industry: the mixed bag of people at all levels, the barbed disputes that can be pared down to fundaments of contract and the inherent challenges involved in operating in far-flung destinations.
As Michael Blacker, head of legal at engineering and construction company Amec puts it: “Amec’s international involvement has led us to the Far East, Australia, Hong Kong, the United Arab Emirates, Nigeria, North America and Bulgaria. I need to have an appreciation and understanding of overseas jurisdictions, and this is a vital and interesting challenge for an in-house counsel.”
Other challenges relate to recent and significant trends within the industry. Mandatory adjudication for construction disputes, for example, came into force in 1998 and has had a strong impact on lawyers’ work. The informal process is quick, flexible and cheap. As Martin Lenihan, senior group adviser at construction services company Skanska, comments: “There’s no question that adjudication has saved the construction industry countless millions per year. Things can now get resolved in 28 days compared to years.”
Rather pragmatically, adjudicators can be chosen for a dispute depending on their technical background. The process has been credited with saving professional relationships and issues have been tidied away at a fraction of the time and cost of litigation. In short, it appears that everyone is a winner.
Well, not quite. Martin Roberts, a construction partner at Masons, points out that, while adjudication is largely a positive influence, it does have its drawbacks. “Over the first few years, most parties were either reluctantly or fairly happily accepting of the adjudication decision,” he says. “Now people are more aware that adjudicators don’t always get it right and parties are more prepared to look beyond that decision. Additionally, not all disputes are appropriate for the adjudication forum. Increasingly, adjudication is being used for large and complex ‘final account disputes’, where there are simply too many elements to be dealt with in the time available to the adjudicator.”
Roberts has seen an increase in the use of mediation, either to avoid adjudication or to resolve disputed adjudicated decisions. There has also been an increasing number of challenges to adjudicated decisions in the High Court. However, the lawyers agree that, in general, adjudication saves time and money by avoiding the courts when resolving construction disputes.
The importance of close working relationships, or ‘strategic partnering’, is another hallmark of the increasingly sophisticated construction sector. Frank McCormack, head of legal at engineering and construction company Balfour Beatty, summarised the move towards alliances. “Traditionally, construction disputes saw each party pointing the finger at everyone else and the whole thing couldn’t move forward,” he says. “Now we’re trying to introduce the idea of all parties in a project working in a cooperative way from the outset.” This, argues McCormack, is a potentially risky route, as it lets everyone into an inner circle; but he believes that the problems in the contract are often ironed out thanks to the resulting clarity. Consequently, he argues, the project moves along to a conclusion.
“Parties become partners and share potential profits or losses at the completion of a project,” adds McCormack. “Usually the experience is good and the relationships forged may be taken up in the next job.”
Repeat business is something that Peter Brinley-Codd, head of legal at Sir Robert McAlpine, also attributes to strategic alliances. He estimates that the approach has ensured 70 per cent repeat business for his company.
The lawyers agree that an extremely important part of their role is meeting corporate governance requirements and heath and safety measures. As Amec’s Blacker says: “A big issue for us has been the need to be aware of corporate governance issues: making sure our company’s conducting itself properly in a legal and ethical sense and to ensure our directors comply with the requisite duties.”
Lenihan at Skanska agrees. “We can’t run away from corporate governance,” he claims. “If we get it wrong, not only can our directors lose their jobs, but they can also go to jail. It really threatens the business and touches every aspect of the business we seek to protect.”
McCormack bemoans the related “blame culture” that has sprung up within the community. “I struggle with the idea that when things go wrong, people need to find someone to blame,” he says. “Personal liability has been hard to rationalise and we’ve been putting lots of effort into trying to understand that sometimes just doing your job right isn’t enough. These are constant, complex issues that we have to face up to.”
The lawyers agree that the construction industry is constantly changing. As McCormack says: “The sector’s a great one to work in because it’s both endlessly optimistic and opportunistic. We’re not afraid of new things or trying to make them work.”
Roberts at Masons adds that variation in project structure and different types of contracts and bespoke forms mean that lawyers have to seek to understand each part of a project. “Essentially, no longer can parties stick the contract into the drawer and forget about it,” he emphasises. “Lawyers are now seen as a part of the construction process, and need to understand how the contract works and help their clients to manage their contractual risk.”
|Organisation:||Taylor Woodrow Construction|
|Annual legal spend:||N/A|
|Head of legal:||Simon Williams|
|Main law firms:||Campbell Hooper, Hammonds and Wragge & Co|
Chief solicitor Simon Williams has been active in the industry for 20 years. Work for Taylor Woodrow has seen him travel widely, from infrastructure projects in the Far East and Russia to reparation projects in Kuwait.
In 1997 Williams became chief solicitor, currently working on ProCure 21 initiatives, and is in the process of establishing an alliance of some 40 or so designers and constructors in order to carry out projects for NHS trusts.
“The industry is good to work in,” says Williams. “It’s dynamic and still an essentially academic environment.
|Annual legal spend:||Undisclosed|
|Head of legal:||Michael Blacker|
|Main law firms:||CMS Cameron McKenna, Linklaters, Masons and Wragge & Co|
Michael Blacker is head of legal at Amec. His in-house career has included a tenure at George Wimpey as legal director prior to his seven-year run at Amec.
His enthusiasm for the industry stems from “being constantly faced with interesting contractual issues and different jurisdictions. Construction issues can be reduced to good, old-fashioned law at its best.”
Day-to-day work includes drafting and negotiating major contracts, advising on risks and resolving disputes.
|Organisation:||Bovis Lend Lease|
|Annual legal spend:||N/A|
|Head of legal:||Neil Martin|
|Main law firms:||Clifford Chance, DLA, Linklaters, and Masons|
Neil Martin trained as an engineer and cemented his technical understanding of onstruction through an early career as a site contract manager.He retrained as a lawyer and joined Bovis Lend Lease five years ago and is now company secretary and head of legal for Europe. Aged 36, his rise up the in-house stepladder is something he is understandably proud of.
|Annual legal spend:||N/A|
|Head of legal:||Mark Galloway|
|Main law firms:||N/A|
Senior group adviser Martin Lenihan, who reports to Mark Galloway, has been advising on construction issues for more than 20 years. After a short spell in private practice he moved in-house, as much for quality of life issues as the opportunity for a hands-on approach to major deals.
Recent work includes closing the Walsgrave Hospital and Derby Hospital private finance initiative (PFI) deals, worth a whopping £334m and £333m respectively, and the Moor House project currently being built at Moorgate. He is also involved in the Royal and Barts PFI hospital project, for which Skanska is at preferred bidder stage.
Lenihan and his team are responsible for the vast majority of legal work and rarely outsource. Lenihan credits his “intelligent senior management” for recognising the value of this approach. “We do the front-end work and take care of any litigation at the other end. We only ever consider outside firms if we’re completely inundated.”
|Annual legal spend:||Head office £12m, operations (including PFI) £12m|
|Head of legal:||Frank McCormack|
|Main law firms:||Various|
Head of legal Frank McCormack came to Balfour Beatty from private practice in 1987. His rise to head of legal took 18 months, and in 1999 he became head of legal for the construction company.
McCormack is a member of the executive group, comprising functional and executive heads. His team is concentrating heavily on private finance initiative (PFI)/public-private partnership (PPP) work, including the Edinburgh Royal Infirmary deal, which is worth more than £300m.
Other PFI highlights include a 20 per cent share in Metronet and a 50 per cent share in Royal Mail.
|Organisation:||Sir Robert McAlpine|
|Annual legal spend:||N/A|
|Head of legal:||Peter Brinley-Codd|
|Main law firms:||Undisclosed|
Peter Brinley-Codd has been an in-house counsel throughout his career. Earlier stomping grounds included HBG Construction and the now defunct George Wimpey.
Initially qualified as a barrister, he requalified as a solicitor as this was more representative of in-house counsel work.
Brinley-Codd has recently wrapped up the £573m Colchester Garrison project, which involved the construction of a mini village for soldiers.