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“Smart move” for projects in distress

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“The world has certainly been turned on its collective head in these first few months of 2020 with the COVID-19 pandemic, and the ongoing global responses to it and the challenges it presents. The impact globally on projects and indeed the broad engineering-oriented environment is already significant, and becoming more so”, says Ian McKechnie, CEO and principal advisor at engineering and project advisory firm Engenamic.

Ian McKechnie, CEO and principal advisor at Engenamic.

“Consequently, many projects and engineering/industrial operations are finding themselves in distressed conditions and situations. This applies to both ‘conventional’ and public-private partnerships, and to a broad-range of engineering, resources and industrial sectors”.

There are reports around the world of projects with contractors and/or the clients declaring force majeure or similar, and there is a growing potential of adversarial/dispute and/or of failure or other undesirable situations and outcomes quickly developing. McKechnie says that these can potentially be very costly and detrimental to parties and relationships, but that there are other, and potentially preferable, options.

“A ‘smarter move’ in the circumstances, and certainly at least in the first instance, would be for the parties to strategically adopt a ‘pragmatic sustainability’ and dispute-avoidance approach and intervention in such distressed project and engineering/industrial operations situations”. He says that can be advantageous to all parties in seeking to alleviate the distress and ‘rescue’ the situation through more sustainable and mutually beneficial outcomes – that is, “seeking the more ‘win-win’ and sustainability types of scenario outcomes”.

“Such an approach creates opportunity – for those willing to embrace it – to evaluate, rethink, reset, change and find positive, broadly-beneficial and, perhaps most importantly, sustainable ways forward. To move forward ‘smartly’!”

This preferred outcome (or approach) is not always possible or feasible, and disputes and other adversarial situations can nevertheless arise, he states that “we advocate strategically adopting and pursuing such a ‘pragmatic sustainability’ dispute-avoidance approach and process in seeking such outcomes, as a preferred option” he says.

“This could be the ‘smartest move’ in the circumstances”. Parties should be encouraged to start such processes as soon as possible, and that these processes would benefit from external and independent, objective facilitation and support.

The Construction Leadership Council in the UK on Thursday 7 May 2020 published its COVID-19 Contractual Best Practice Guidance. The introduction to this document notes that “there is a real concern that the construction (including maintenance) industry will become embroiled in costly and long-running disputes…if it does not look to engage in collaborative discussions…”

“This resonates with the ‘pragmatic sustainability’ approach that we advocate at Engenamic, and of course pertains not only to the construction sector”. Visit www.engenamic.com for more information

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