Document technology could drive down legal costs in construction

Document technology could drive down legal costs in construction

Tech has driven the construction sector forward in leaps and bounds, but legal agreements are still slow, complex and paper-based

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16th October, 2021

At a time when construction is needed more than ever to both get the economy moving as well as solve the housing crisis, any issue that slows work is an unwelcome one. Today, whether it is civil engineering, residential construction or the building of offices, complex works involving multiple parties naturally demand complex legal arrangements.

And yet, simplification is possible. “The construction contract itself comes in many guises and forms,” said Larry Fenelon, co-founder and partner at Leman Solicitors.

“First, you are dealing with a variety of people and you can get a bespoke contract. The industry deals with voluminous details in contact documentation.”

Fenelon said that it was a particular issue for specialist businesses, which are often small and therefore not able to take on walls of paper.

“The clients we’re dealing with are not the Sisks or the Colleens; they tend to be specialist builders and electrical and other engineers. They're smaller, but specialised. They are very sophisticated, but they often come to us and say they don't understand the contract,” he said.

A typical contract will be based on a standard one, but made much larger due to variations, often with nine or ten further peripheral documents on top of that.

“Then you're spreading it out on the boardroom table with all of this paper, the tender documents and the drawings; it's a kaleidoscope of documents and if the industry is serious about well working inter-relationships it should work to simplify this,” Fenelon said. “It's great for lawyers, they're probably the only beneficiaries.”

The lack of a user-friendly way of dealing with paper also harms small businesses, as it shifts heavily the balance of power in favour of the main contractor.

“Most specialist contractors who become subcontractors in a larger development don't have the skillset, capability or resources to deal with the reams of paperwork. Typically, what happens is they get the document and they don't negotiate it,” said Fenelon.

None of this is to say that the contracts are unnecessary: on a complex job such as a construction project, involving a number of parties, every task needs to be specified and costed.

Fenelon said that a few things really stood out as notable pain points with paper: conditions relating to payment, as well as making a claim for extra time or money, are often a problem.

“This should be a call to action,” he said. “From the get-go, legal involvement is mandatory for significant contacts and sub-contracts, in order to precisely advise on the risks, obligations and rights.”

But it could be made easier for everyone. “The digitalisation of that would help as you could do things like search for words. I think the industry should embrace a digital form of contact,” Fenelon said.

Indeed, digitalisation would make signing easy, amendments easier, and searching would be simple. Even finding “lost” documents would be easy with even a rudimentary document management system.

Of course, one thing that could move things along is if the state stepped in and made digital contracts mandatory. “It's quite doable,” said Fenelon.

Whether or not a cohort in the industry prefers an under-resourced body of specialist contractors, the natural next step is to have a standard electronic platform: effectively a portal with legally compliant recording and time and date stamping.

“What we need is a standard that all building contractors and employees use, with a licence issued and a common standard where you can upload documents, live chat, serve notices and receive notices and charges, have minutes of meetings uploaded, and where any evidence by any party to support a claim can be recorded and referenced,” Fenelon said.

He added that the absence of a technology platform was peculiar, because construction as an industry has, on the whole, embraced tech in a forward-looking manner.

“In an age where the industry has embraced BIM modelling – as the saying in the industry goes, ‘If you don't do BIM you're not in’ – this is all very possible,” he said.

“The industry has absolutely embraced electronic work and the benefits it brings; it just lacks leadership in this area for interaction between parties.”

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