In this webinar, Paul Sills (Arbitra International, UK) discussed the key issues in construction, and Beatriz Rosa (Taroba Engineering, Brazil) discussed the engineering aspects in major projects.
Paul Sills
Independent Arbitrator & Mediator
Arbitra International, UK
Paul Sills is a leading independent international arbitrator and mediator with over 27 years legal experience, often involving multi-parties and complex commercial issues.
Prior to becoming a full-time neutral, Paul spent time as a CEO and Director for a number of international businesses, including in international freight and transportation, where his focus is on energy transition and ESG issues. Paul has also been the Managing Director of an international construction company. He now specialises in long-term dispute resolution projects, including facilitated negotiation, Dispute Avoidance Boards and Investor-State mediation. Paul has recently been named as one of the change-makers in New Zealand's Lawyer's inaugural Most Influential Lawyers list 2021.
Beatriz Rosa
Founding Partner
Production and Mechanical Engineer
Tarobá Engenharia e Negócios Ltda in
Brazil
Beatriz specialises in Defense Engineering and is experienced in many industries in Brazil and abroad on strategic and infrastructure projects within the many sectors - defence, energy, oil and gas, steel plants, logistics, transport, railways, packaging and material handling. She contributes to influencing Public Policies in these sectors.
Beatriz is also a member of Dispute Boards in Brazil and Peru, as well as an arbitrator, mediator and expert engineer in judicial and arbitration proceedings. She currently serves as Treasurer of the Dispute Resolution Board Foundation Region 4 Board of Directors. She was Director of the Chamber of Mediation and Arbitration of the Institute of Engineering and the Mediation Center of the Civil Construction Union of the State of São Paulo. Beatriz is on the list of mediators of CAMARB, CAM-CCBC and CMS. In the USA, she is on the Neutral Panel of the CPR- The International Institute for Conflict Prevention & Resolution. She was director of CONIMA- National Council of Mediation and Arbitration Institutions and is director of IBDiC-Brazilian Institute of Construction Law.
Transcript
Key issues in construction & engineering aspects in major projects
Bill Introduction 00:00
So international work is a particular area of expertise and today, to show that, we are joining by two fantastic speakers: Paul Sills of Arbitra International, and Beatriz Rosa from Taroba Engineering in Brazil.
I should say Paul is sort of out of New Zealand so in a way you couldn't get further apart and different, so they're going to be talking about build back better and engineering aspects in major projects.
Quick housekeeping you're on zoom so you can be muted the chat function works throughout to do put questions in anybody answer question you might find other people on the call on webinars red or we will put your question to Paul or Beatrix and at the end will open again all the cameras and microphones so that you can ask questions direct.
I'm also very keen that is this somebody you see on the web by you like an introduction to let me know and I will introduce you or if you see somebody new and you want some information on them. I'm not precious about the webinars obviously I want you to look at Barton legal in terms of instruction, but there's loads and loads of amazing people who have joined this webinar who have got incredible experience that you can and should go to to ask for help and assistance. Klaus is on for example he's going incredible experienced these are sort of people that you should put your questions to as well.
01:50
So let me introduce her school Paul:
Paul is a leading independent international arbitrator and mediator with over 27 years' experience. Doesn't look old enough does he. Often involving multi parties and complex commercial issues. Prior to becoming a full time neutral, Paul spent time as a CEO and director for a number of international businesses, including an international freight and transportation company, where his focus was on energy transition and ESG issues but he was also MD of an international construction. Paul now specialises in long term dispute resolution projects including facilitated negotiation dispute avoidance boards and investor state mediation because who wouldn't want to be involved in investor state mediation. Paul regularly lectures and publishes articles on dispute resolution in the UK and internationally and he runs advanced training for mediators and arbitrators in New Zealand where he was originally based before moving to London. He is also trained at the Harvard programme on negotiation, focusing on complex and multi-party disputes, particularly those with a public policy or public interest component. Pauls engagements in the energy transition sector included long term facilitated negotiated projects, dealing with solar energy. Paul was also recently named as one of the changemakers in New Zealand lawyers inaugural most influential lawyers list 2021. So they go, he's a sort of person you need to speak to.
An interesting fact, I like interesting facts people he took two years hours law to run a superyacht construction company to CEO with production facilities in New Zealand and Australia, where they undertook both new bills and refits on numerous superyachts. There new build philosophy was focused on the use of carbon both hull and superstructure and in particular the resin infusion of a large carbon structures, together with modular construction and designs. So lots of construction aspects, they were the first company globally to successfully resin infuse a 50 metre carbon hole in one single eight hour operation and Paul was also involved in extensive negotiations with the economic Development Board in Singapore for the construction of robotic based boat building facility in Singapore. I nearly got through without stumbling.
4:38
We also joined by and Beatriz Rosa from Taroba engineering, who's based in Brazi.l Beatrix has a degree in mechanical production engineering from institute of engineering education Sau Paulo; a masters degree in technologies and management of cogeneration and distributed generation from the Polytechnic school of Sao Paulo USP and specialisation in defence engineering from ime, instituted military engineering. So not just incredibly bright but well tough. Beatriz has been acting for many years as a member of dispute boards in Brazil and Peru, as well as arbitrator mediator and expert engineer in judicial arbitration proceedings. She currently serves as treasurer for the dispute resolution board foundation, region four which covers the countries in Latin America and she was also directed the chamber had mediation and arbitration of the institute of engineering and mediation centre the civil construction union of the state of Sau Paulo.
One thing I should protect construction engineering industry, we really need to think of shorter names for all our institutions and more amusing acronyms for them..
In Brazil, Beatrix is one of the leading arbitrators mediators on the CMAIE list, the Chamber of mediation and arbitration of the IBDE Brazilian institute of energy law studies; on kames the Chamber of the CIESP FIESP&FIEP and IMAB. So Beatrix you are going to have to tell us what all these stand for, I do know but it's much better coming from you, and in the USA beatrix's on the neutral panel of the CPR which is the International Institute for conflict prevention and resolution. So she not only practices but preachers dispute avoidance and she's a director of the hybrid Brazilian institute of constructional law. She's been a director the National Council mediation and arbitration and institution.
And thus you are today, lovely audience, blessed with two truly incredible international speakers, so if you don't ask them questions more fool you.
An interesting fact about Beatrix and one that she is very happy to talk about is her interest in the empowerment of women and part of the NGO international business and professional women's network which encourages leadership and knowledge sharing, and I echo that very important.
07:31
We're going to start with Paul, I'm going to hand over to Paul. Paul will take questions both during if there's a burning question you want to ask him then feel free to unmute and stick it to him or you can put a question in the chat and I will ask him at the end and will open up the mics briefly at the end of his talk so you can ask questions. Then there Beatriz will speak and will have some questions to Beatriz and then we'll have an open session, where you can ask more questions of Beatriz and Paul together. Please put questions in the chat, don't be shy and Ill hand over to Paul thanks very much.
Paul 08:15
Excellent thank you bill and having successfully taken up all my time on our introductions erm I might open the floor to questions. As bill said questions as we go through so to make use of that chat while you are perhaps listening to me and while we start I would be very interested to hear since we've got so many people from around the globe, what you see in your jurisdiction, or globally or regionally, as the key issue for the construction industry in 2023 and beyond? and beyond if you want. So if you can pop those up as we're talking through that would be would be wonderful
If we can start on the slides, please. Get through that's a bit of advertising for arbitra and the introduction: so the construction industry why does it constantly seem to be in trouble and what is it gonna look like in the future.
And we are talking on unsubstantial point of course 13% of GDP, 27% of international commercial arbitration work is taken up by the construction industry, 48 or 30% of U add energy, 13% of GDP slowest growing industry it competes at that level with agriculture.
McKinsey report a few years ago said that the growth rate in construction had been 1.5% since the 1930s, which is a staggeringly low rate for such a big industry, why is it not a cohesive industry? why is it not moving forward given the volume of build work that's been occurring around the globe since the 1930s? what is going on, they are all issues that we deal with constantly in construction.
And of course there's been the pandemic and as Bill said we've got Ukraine issue, we've got the energy issue, we have some of the stuff going to be touching on very briefly supply issues, et cetera. So what is it going to look moving forward and what do I think is the key issue in the construction industry over the next few years?
So we can move on, I put these down as post pandemic issues but but really I think these are very typical issues for the construction industry. Solvency is always an issue and I think and we were talking about this before you joined us as an audience. Of course in a potential global recession or or many jurisdictions being in a recession, solvency is always going to be an issue and certainly access to funding for projects is becoming frequently a point of pressure and of course liquidation and delay damages, we've seen a lot of that post pandemic. We will continue to see that with long term projects that run both through the pandemic and on, and potentially ongoing disruption supply chain, we touched upon briefly there and some other issues.
Contract administration and assessment of contractor claims, well that was certainly an issue through the pandemic an out the other side of it, as contractor claims particularly force majeure for extensions of time ex cetera, have been pored over very carefully. Really a question for you all to think on our very much like some feedback in the chat or via questions as well as preferred dispute resolution methodology negotiation, there was a big push during the pandemic for example of increased negotiation versus adjudicating or litigating, where do you see that moving forward in your jurisdiction? in your region? That's another point I'd like to touch on and moving on thank you.
A big sort of stand alone issue, but it does come into this question of some of the other areas we're looking at is of course the shrinking workforce and some stats there since 2014. 50% increase in the numbers needed, 14% uptake and so that drives two issues: really one is an increasing look at high tech and that comes up very quickly against one of the big problems as I see it for construction globally is a generally across the board and I am generalising failure to uptake on technology, and it also means that staff retention is critical and of course that adds particularly on there's been a lot of commentary where I am in the UK of course about weight spiral, these enormous pressure from all the trade unions nursing teaching Etc at the moment. But also around the world a lot of pressure on, coming from staff within the construction industry because of shortages supply etcetera, so a lot of work has been done. A lot of work needs to be done on staff retention and the upskilling of staff and will look at why shortly and so next thank you
And one that's being talked about a great deal over the last couple of years supply chain. Initially it's been a twofold impact: physical delays and increased costs. As bill said I still working in the freight industry is an independent director and both have been significant. The lead time for turning around and contained a vessel at Long Beach with 40% of the world's freight goes through in California was pre pandemic 18 hours, at the height last year it was 28 days. A 40 ft container from New Zealand to Long Beach going into America pre pandemic was 5000 U.S. dollars, at the height last year 20,000 U.S. dollars. Now both of those sorts of physical and cost aspects, are improving as those bottlenecks particularly China, Hong Kong and Long Beach, have started bringing up. But the real issue moving forward as I've said there for supply chain as regulatory compliance and human rights due diligence and we're going to touch up on that shortly and as I said there is an increased focus on ESG environmental social governance issues in 2023 and beyond and you will very quickly see that that is my main theme for what is going to impact the most upon the construction industry, as we move forward. So next please
Very briefly, youve work through these and I think these slides will be available so I won't spend too much time on these ten points for managing your supply chain but is it really just to summarise: a proactive approach to supply chain management and supply chain risk mitigation I think is an essential issue still moving forward not just because of the physical delays but because of the value chain focused that is coming in around the globe over from now, moving forward and really staying on top of the assessment of risks in the mitigation as I said of those in your supply chain having backup suppliers considering local suppliers all of those typical things that we need to look at. Thank you.
And of course, the inflationary pressure and that is one that set to continue around the globe. Great news here in the UK I think we've dropped back to 10.6 from 10.9 or something in the in the last month, but from 2021 through until last year there was on average 17 to 21% rise increase in key materials around the globe and those figures don't change a lot globally, to steel iron timber and other critical materials. So what impact does that have a on the construction industry practically?
Well modifying bidding strategies and modifying pricing I think is the fundamental change. If we're looking at two aspects really, one big margin and we all know that margins are typically low, arguably too low in the construction industry, and also contingency project margins 5 to 10% all need to be to be looked at. Contractors need to reassess their pricing models trying to mitigate those ongoing delays and mitigate some of the increasing costs they are going to be facing and equally employers need to reassess project viability and that's a big one moving forward and we go into recession and these things from the last two years, these delays and projects these escalating costs are going to continue, so both parties to the main construction contract need to be reassessing their own viability.
And of course that leads into adjusting contract terms and how much latitude you get on that is really often down to your negotiating strength and what the industry practises becoming and we'll sort of touch on industry practise moving forward a bit of collaboration around that and of course supply chain policies as I have already touched on.
Thank you for those throwing up some of the information: global warming, geopolitical questions recession. Keep those thoughts coming on what you're going to be facing over the next 12 months so we can talk about that at the end. next slide please.
17:45
Now one of the key issues for me and I think in unavoidably for everybody in the construction industry moving forward is ESG: environmental social governance and why is that? Well, the first bullet point says it all.
It is perhaps the most all-encompassing point of theory tuning itself under practical reality that we have seen. It encompasses everything sustainability all the way through to financial crime and data protection it is enormously, enormously broad state of obligations that is in getting increasing focus as we move forward. Some examples there, the European Commission is just brought out its proposal for corporate sustainability, which introduces a value chain obligation and very significant human rights strategies that is going to assist today both strategic and operational change in businesses, that are either in EU at a certain scale or do business within the EU. And US the SEC has proposed climate change disclosure rules out for publicly listed companies and any company listed on a U S Stock Exchange. Germany has just introduced decaying in the 22 numbered just come into force on you did human rights due diligence law and of course there's been pre-existing supply chain legislation already. Interesting one coming out two days ago, France under the duty of vigilance law an NGO instead of activists have taken a claim if you've seen it in the papers against denomie for being too slow and its uptake on modifying its use of plastics. So outside of the energy sector, outside of we were typically seen climate attacks at the moment, we now have this attack on Denomie on plastics under the duty of vigilance law. And moving forward, Thank you.
This really is the I guess the centre theme I would like people to take away and think about talk about ask questions on is this issue of climate, and the facts here are pretty pretty staggering 70% of annual global carbon emissions comes from cities. Buildings alone account for 40% of that. By 2060 world building stock will have doubled and 70% of the world will be living in cities. If cement were a country, it would be the third on the all-time greatest hits list for carbon admissions and really from cop 26 which was Glasgow, two years ago, 2021, we have seen an increasing focus on construction without particularly yet any significant changes but the big the last bullet point is the most important global stock take 2023, what is that? That is the first object of assessment coming out of the Paris agreement on the world, every signatory to the to the Paris agreements progress to date on carbon emission reduction. That comes out in time for cop 28 in the UAE in November of this year and I would envisage that it will make very startling reading in a negative sense for pretty much every country on the planet, for a whole bunch of reasons and excuses but I was gonna draw everybody's attention to the fact, that the action taken to date is falling significantly short of the 1.5 degree Celsius target and so that alone is going to embarrass governments around the world to up their game and getting serious about the regulation of climate and carbon emissions and I think that without question is the biggest issue facing the construction industry and potentially the biggest opportunity facing the construction industry globally. Thank you, moving on.
We will just flick through this but interesting 80% of today's building second point will still be used in 2050, 75% of those buildings are energy inefficient. The EU alone is talking about upgrading, modernising 35 million buildings throughout the EU for energy efficiency.
22:18
And the last point, let's get it into terms that we can understand. The building industry at the moment is adding one NYC every month at the moment, around the globe, so that's sort of the scale that we are dealing with. an next please.
Now the biggest problem and the biggest opportunity I think in in construction come out of this which is a lack of technology, and the flipside of it getting to grips with the use of technology. Why does construction not use a lot of technology? These are Royal Institute of Chartered Surveyors study says that these three reasons, and I, from 27 years in dealing with construction certainly agree and I'll be interested in your thoughts on your own experiences of this, and of course it's a generalisation, there will be companies an sectors within the industry that are phenomenal early adopters of technology, but I think the point I want to stress is, I think in particular the climate driven issues again to mean that the industry as a whole needs to seriously upgrade as technology use and that I think is the biggest opportunity for cohesion and for a disruption within the industry globally to bring it into the modern century if I can put it that way. thank you.
And this is where we see why, because the same studies shows some staggering percentage increases on improvements with greater technological investment and of course the bottom two carbon footprint calculation and ESG are no surprise. But also look at the 3rd whole life and whole asset thinking which ties really nicely into some of the other technology options that we're seeing being picked up now and construction and so flicking forward.
Design technology, we're not gonna stay here long coz you'll know building information modelling probably better than me, but the up takers is getting pretty good 60 to 70% and the volume of money and the billions being spent on BIM is increasing year on year about 40 1/2%, so this is a good example of an uptake of technology there's a lot more to be done as we will start seeing, next slide thank you.
Because here is all the other technology innovations, some of which you will say yes they are becoming commonplace, but augmented reality, smart construction wearables - were up and doing a lot of work recently, drone use - of course is one of the ones that is better understood, modular construction - I've been working on it for a while, is increasing year by year huge waste another other savings coming out of modular construction, the same with 3D printing - particularly in the use of reduction of cement going into concrete because they can get it at the structure the structural integrity of a better with 3D printing, BIM as we've said in the use of blockchain. So there's been a start, there is an enormous amount that is now sitting out there yet to be done and yet to be picked up by a lot of the industry so moving forward thank you.
As a study modular design, pick up a significant increase in North America over the three years the permanent modular construction projects rose by 51%. It's still only about 100 billion U.S. dollar part of the construction industry but since it to grow year on year. For the areas that I'm interested in in these days which is less waste, refurbishment, relocation, reduction of energy use et cetera. It is becoming, I think, increasingly interesting or important part of the market as a whole thank you.
Digital twins, which you may well of course know about, it's really an extension of things like BIM, but it is using the technology into ever increasing use of scope and an example I wanna give as we move through this slide isn't scenario simulation, so since 2014 Singapore has had a digital twin of the entire island and the city and they use it for all of the emergency and disaster prediction work and for all of their city maintenance and development, so a really really good example of the scope digital of twins in the three areas I've got at the bottom of the slide: identifying inefficiencies, proactive maintenance, scenario simulation. Proactive maintenance, I think, being examples for that will be particularly useful may would be in infrastructure and particularly water infrastructure, so that the three waters where you can save a lot of leaks save a lot of losses by proactive maintenance but you need really really good modelling for that to occur. Why is that important? Let's take an example of Thames Water here and in London which loses 25% of its water per day through two broken pipes and broken infrastructure, which is 60 million litres of water per day moving on thank you.
Another option, value engineering, I won't spend time on here some conscious of ripping through time, value engineering. If you're European you will that value management. Yet again it's just extension of using technology to look at all aspects of solving problems so this goes beyond BIM, that goes beyond having a digital twin and starts looking at everything including the materials availability, construction methodology, transport issues, which were being you know significant last few years, site limitations and restrictions, so where you might use 3D printer for your concrete, for example where you might do a normal straight pour. All of these things come into value engineering or value management of a project, so these are all sort of extensions and thinking beyond you know taking care drawing into 3D and then into burn, this is also enable what's next and what's next and what's next and when you start over laying these with things like augmentation of data, of AI, and everything you can see that there is a strong tremendous untapped resource around the world and that can add value to construction and most importantly deal with some of the very significant issues in and around climate. Of course it all comes at a cost and of course that will be a very significant issue for a lot of users within the construction industry particularly we are in recession.
So one more slide on value engineering thank you and what does it involve?
Well as you see it's very multidisciplinary and it's not really just about engineering which is why the Europeans change US terminology to mean value management and it is really looking at all of those aspects of a product or a service and really focusing on the alternative solutions and always challenging how can we do these things better. thank you moving on.
Second the last slide, this is another huge area which taps into climate and is in is going to become I think the focus of 2023 onwards and why do I say 2023 onwards? Really because of the global stock take under the Paris agreement, that is going to show us globally what we all I think know intrinsically, which is not much has happened and we are not in the position that we thought we were. For example, a report in the guardian yesterday if any of you saw it where a North American study has challenged actually how effective the deforestation carbon offsetting has been globally and suggested that a significant number of the projects have not actually add anything to carbon reduction at all and of course carbon offsetting has been a significant tool used by a lot of the global players and energy and in construction and others moving forward, so now that's under the microscope as well. But the big one here of course is construction materials and waste EU example 35% have always generated is from the construction industry and some examples are think about talk about after this of where that might change, where it needs to change and they certainly work occurring around the world in these spaces. So recycled concrete and masonry, going back into basic construction residential housing et cetera. One of the positives of adding masonry back in is it has better thermal qualities and straight concrete. Cement used in road construction to road transport is the main anthropogenic source of nitrogen oxide in the atmosphere, so that is generated by humans. Titanium oxide reduced as I shouldn't oxide via photocatalytic reaction with sunshine to a simple harmless compound that is now increasingly being used in some of the Scandinavian countries and tests show a 30% reduction in nitrogen oxide concentrations where that particular type of modified concrete is being used. And of course increased use of timber, and this is a very interesting one for me coming from New Zealand, where the vast majority of our residential builds are timber and we see very few masonry or brick builds, very much the reverse of course coming to live in the UK, but now getting a lot of attention in Europe and we're seeing some really significant increase in the cubic metres of timber being used annually because if you can retain the carbon within the timber then you're getting a 40% reduction in carbon emissions using that timber building as a carbon sink, so a really interesting one to watch as we move forward.
And the very last slide and what I would like some thoughts, perhaps some questions, on you know and this is the arbitrator and mediator coming out to me is, given what the industry is facing and given if you if you agree with me regarding sort of the environmental climate changes as being perhaps the driving thing moving forward, then what forms of dispute resolution are best? Are we going to see a continuation that we of things that we saw during the pandemic of more collaboration or more negotiation. Are we going to fall back to arbitration litigation of course adjudication and miniature restrictions? When there are cut, when there are climate change disputes, what is the best form of dispute resolution does arbitration does litigation work? What about collaboration when we trying to deal with multi-jurisdictional issues like water like climate et cetera? and what roller coasters facilitated negotiation have some takeaway points for you or to throw some questions at me, if we have time I believe that's me thank you very much for listening.
34:00 Bill
That's fantastic Paul and if there are questions please put them in the chat but I'm going to take a long tunic as it's made me think of a number of points so I'm just going to the whole load of things out and then Paul or other people in the chat, you can take them.
So do people you know see the same problems that you've raised in all jurisdictions? Do people think that these problems are local or global, because some are? Are people seeing a movement from private sector build, into public, because of the risks associated with the private sector and perhaps insolvency so more contractors and moving into public and larger projects where they see greater safety in a period of economic downturn are we going to see an opt out of ESG, so you know I'm not trying to particular countries but are countries like Russia and China just going to opt out of things like ESG and therefore people will move to those transition to those countries because it will be easier to build an perhaps cheaper? I see a contrast in Brieham in build standards because brieham might be something that is standard in London, it's not standard even regionally in the UK is the additional cost and so I think there are a lot of the issues raised, that cities or institutions might insist on, but because they are not obligatory, people effectively just opt out. You mentioned timber, does that mean timber from non-deciduous forests and therefore you get other problems you get acid rain wash off and then you look at Ukraine was a massive producer of timber and then you have prejudice, so I have people in the UK so we can't build a house with wood because it rains a lot or it's cold well you know have you not actually notice that you go to all the other countries in the world, that are either colder or wetter or hotter than we are and they build with wood and so that brings me to freshen learning I am on a daily basis stupified by our inability unwillingness to learn from other countries, other companies, which is partly this webinar, about sharing knowledge and you know if Scandinavian countries are changing their roads you know never even heard that problem but great idea but you know why isn't there more learning and more cooperation and collaboration between construction institutes and why can't we as people in this webinar push for greater sharing of information and collaboration, so does anybody have any comments on that or is it just me babbling on or would someone like to ask for a specific question you can unmute and just fire away and if not then I would start with my last point Paul, do you see that there is more scope for learning between industries and between countries in construction? and if there is how would you drive that?
Paul 38:00
The short answer is absolutely and I think there's a you know a real absence of any sense of collaboration in the construction industry as there are many and as there are geopolitically. We are in a very tense geopolitical environment again in the world, sparked off a mere respects by the Russian invasion last year, but then again why I see hope ironically in the very difficult situation that as climate as it's going to drive I hope collaboration and increased learning and increased adoption of smart technologies to assist with these various significant changes that need to come into the construction industry. How do you go about it? Well it takes every industry leader, it takes every industry organisation, and it takes government all the way through to the various UN bodies, to promote that degree of collaboration and for people to start saying actually this is not an issue any longer of how best we can push construction risk around the contract between the various parties but what are we all going to do together to deal with us and I think we will point bill about people increasingly moving into public space and public building to de-risk and perhaps bring some of those certainties home is also where it needs to start so governments need to lead and drive a lot of the collaboration, so not I don't think it is going to be sufficient for them to just regulate and say right now market get on with it. They need to lead the collaboration and the discussion around how to get to those degrees of carbon reduction that they're going to be promulgating at some stage this year, because just to say: this shall be done or we will text you is not going to be sufficient.
Bill 40:00
James just put in the chat actually that's a really good example, every country has utility providers and yet what is the degree of cooperation and sharing of knowledge between utility providers. If you are managing electricity or water you have the same problems whatever country are, to the degree and yet to what extent do those companies make any attempt to share their learning or two to encourage other countries to learn from theirs or invite people or just have you know sessions or conferences, where they are pushing agendas.
Paul 40:50
sharing that agenda and recognising that most importantly it's a shared issue and that's why you know I think a lot of opportunity and optimism can be placed on ironically on the climate issue coz they are going to force us down one or two pathways I think we're going to have to collaborate and James's point about utility providers is excellent because what do they all share? Aged problematic infrastructure that they all need to budget and work on as an example so and in many countries it of this you know a country with a lot of hydro of course water and electricity are very shared interest around the place, so yeah it's the willingness for everybody and really governments need to set the direction for the private sector of collaborating to resolve issues.
41:49 Bill
So taking your point then we will move now to Beatriz because beatriz's is looking at engineering aspects in major projects but also with particular focus on Brazil and Beatriz has some stunning slides as to the issue of projects in Brazil again invite you all to put your questions in the chat over to you
Beatriz 42:23
Thank you, good morning, good afternoon and good evening, to all. First of all, I would like to thank bill Barton for inviting me to share some experiences with you, during this part only the webinar. I am a mechanical and production engineer and at the beginning of my career, I had to put 20 to work in a large Brazilian industry, which allowed me to participate in infrastructure projects, in complex and major projects. I worked on two relevant projects which are examples of everything that can happen in this type of project. It was the construction and erection of thermal larger largest natural gas thermoelectric netting Latin America at the time and a construction of Brazilian submarines, for conventional in one nuclear in both projects and the same was possible to verify to greater or lesser extent in other projects that I participated. We had engineering problems related to economic financial rebalancing, comfort readjustments, noncompliance of activities on the responsibility of contractors, time extension, valuation of under act expenses, progress percento, physical and financial, time scheduling, performance indicators, productivity, several claims and other minor problems. I also was able to verify in this cases that most of the problems were the result of human relationships, many of them caused by intercultural relationship issues. This experience led me to my role of arbitrator, mediator, dispute board member and engineering expert. I had the opportunity to participate in projects in areas of energy oil and gas, still plans, transportation, water and sewage systems, equipment manufacturing and others and all of them had the same kind of problems. When we get this project to come to an end, we certainly do so with a certain amount of suffering. The engineer wants to see his work up and running, it is not in the interest of the engineer, not to complete his creation. Engineering is not interested in paralysing at work, however this is not always possible. The information that I'm going to share with you now is an overview of the reality of stop two construction words in Brazil and you will see that the reasons for these words being paralysed are related to engineering issues I just mentioned. A Brazilian think tank compiled data published by the account to federal courts the TCU true gaol referencing the location of the works this TCU data is the result of objects carried out in 2018. The results were published by the dcu in may 2019 in which 38,412 public works were analysed and it was found that of these there were 14,403 paralysed works. Therefore 37.5% of the analysed public works, were stopped in 2018 and you can see that between 2013 and 2015, there was a greater accumulation of stop construction works.
We're talking about schools, hospitals, clinics, health units, public buildings, public shift light, museums, highways, railways, sanitation works, water, oil and gas infrastructure petrochemical plants, subway, transport works among many others. This map is dynamic and publicly available and you can access it through the QR projected on the screen. This reality is not unique in our region, for example, the general Comptroller of the Republic of Peru published in March 2019 a report of stop construction works until July 2018. They consider national and original works. On that date, Peru found that there were 867 stop construction works representing a 16.87 billion souls. This is $5.15 billion, American dollars. In 2020 Columbia published a law that seeks the history of unfinished civil works which in itself demonstrates the person with the completion of these works. Obviously the Brazilian reality is very impressive but it has to be considered that Brazil is a figurative unit that has finally six states one federal district and 5570 what is a pallet is, with dozens of ministries and agencies and other publications is carried out construction works.
The county federal court investigated their reasons for the suspension of the analysed works. Although only 23% of them registered the reason, the TCU pointed out that the reasons are divided eight issues. The most relevant issues represent 80% of the cases and are linked to technical issues abandonment of the work by the contracted companies or financial and budgetary issues. There are also stop its cause by legal issues actuals by control bodies issues related to expropriations and environmental questions. We know that these issues are precisely the ones that appear most in construction contracts and that these are exactly the issues that this could words around the world have been dealing with. My experience as a member of this group boards in addition to technical issues has been to verify that a big part of the problems are caused by lack of communication. It is very important that the flow of communication, the dialogue does not stop and the DBs have been contributed attributing for this dialogue to continue.
To have an idea of the impact of this project, that distribution of this construction works in billions of the eyes is represented on this map where the darkest blue colour represents the state sweet works above 5.75 billion eyes were round up 1.48 billion U.S. dollars. The lighter blue colour shows the works with various lower than .96 billion heist around 37.2 billion U.S. dollars. These numbers are from 2000 18 nowadays there is an estimate of this you of about 22,000 stop towards.
The new Brazilian public bidding law of 2021 provides for new forms of contracting and various mechanisms for the prevention and resolution of disputes, including the dispute board. What is expected is that DBS will the mandatory specially works that have external financial and surety bonds, the law requires surety bones when the contract is greater than 200 million KIs around 33.96 million U.S. dollars. This law has been very important for the development of the DB because it authorised the public managers to choose that's footboards for the prevention and his solution of disputes and effectively it has had an influence in this says in such a way that the indication of the bees in several contracts now are being that are been signs already increasing. Brazilian law today, even allows the inclusion of this footboards true contractor amendment it is expected that DBS we will avoid beneficience allocation of public resources because the public administration could obtain more advantages prices and more cordial and less litigious business environment therefore the public administration could apply the resources to other needs of its citizens.
I stopped work brings harm to the public administration to the contractor itself into SoC as a whole when issues cannot be resolved 2 during the contract is a question deadlines are not met and SoC is left without the asset or public infrastructure for its use in addition I stopped work needs to be managed so it could change to generate costs they use of sport boards means better risk management and better control of disputes. Stopped work represents unforeseen safety costs liability start costs of conservation costs of demo, debilitation, maintenance of equipment, were set to resume the work there maybe rework costs to recover some deteriorated part if possible. There are times that you need still demolish adds to do another work on top of it. All of this represents a harm done to society, reducing the costs of a works means that in the future there may be money for more works this is what matters to society specially in Latin America region where the lack of money is very high. Certainly dispute boards will make this equation of contracts in those 5500 and 770 municipalities improve overtime the projects will be better planned and designed reducing the waste of money that in the municipalities is always very scarce leaving money for other investments and programmes that are current neglected its footboards are tools for the public administration to benefit from works that are finished we also see the possibility of better infrastructure in the most distant places reaching populations that today are not provided with that equate quality of life the top desired reduction of impacts to the environment and the preservation of the environment will come for sure. Finally dispute boards in east engineering eyes that should solve several engineering problems we are facing and the before I finish my speech as a director of the dispute resolution board foundation region for the Latin America region, I invite to be part of the DRBF. We are in no regions of the world and I think, this is one way that we can use to share engineering experiences and come to our regions with more information to do better our engineering. thank you very much
Bill 57:54
Thank you very much Beatriz. A couple of questions for race open to win else, do you think that you mention cultural issues the beginning do you think that we are as an industry getting better at dealing with cultural issues? or do you think that with and more globalisation with projects, cultural issues are just continued?
58:29 Beatriz
I think that we are going to have always questions from these differences between cultures in global projects and our experience in our region is that we should import technology and ways to do the construction and the only way we have in the region to do our infrastructure is to have external financing to have global companies working here and we are all always going to have people that are coming from different cultures and we are better now than ten years ago. We had much more problems due to these differences from 20-15 years ago but now we improved a lot but we still have a lot of problems related to this because for example, we have a very important problem here, That is our basic designs are so bad, so always we begin a construction with very few information and this impacts directly in the price and in the schedule of the works and we have you know we have a lot to learn with companies and with people that are doing construction outside our reach.
1:00:26 Bill
And you mentioned that the mandating of 1 alfords peoples which I'm I'm not sure well what what's the view of people if we can open everyone's microphones what what is peoples general view to you do people agree that these people should be mandatory I certainly agree that more people should appoint and use standing dispute boards because I think sales that should be utilised in their experience and I see the failure of parties at contracting section I'm as a is a problem and the absence in most instances of dispute boards being appointed so you know I don't know if there's a general view to people and Beatrix mean presumably you're very much in favour of mandatory dispute boards?
Beatriz 1:01:29
We really think that mandatory dispute boards is a very good solution and we feel that the use of this dispute boards in this conditions also gives to the public cultural organs because in 95% of the projects in the re in our region are public projects so then the public cartoonist traitor has with the dispute boards very good mechanism to have more control about the solution of the closure, tell really I believe that the standing dispute borders are very good mechanisms that we can use to do better our infrastructure but I really do not believe that the dispute boards, the adult dispute boards are a good solution. So this is also related that little bit with the culture of the region also there is another discussion that this discussion that we have in the region about having recommendation or decision in our region is much more efficient if we have decisions. The recommendation due to our culture are not normally followed you see so all these things I'm telling you because we can hear all around the world about the dispute boards in Australia, is really being used and the results are very good the way to to use the dispute board is not the same in the different parts of the world, really we have to analyse the culture of that region and choose the best type of dispute boards in the way they work, the best the best rules for that region.
Bill 1:04:12
Does anybody not like dispute boards, who's listening, those taking part, has anyone got a particular view that's against dispute boards don't be shy. Has anyone had an experience with a dispute bold that has put them off really wanting to use them? OK so David said the pool from which they're drawn. I mean that is a recurring problem that they in different regions I know drbf is very keen to encourage people to appoint at least one member of standing boards from outside of region pools become very well-known and I think that's replicated in the UK most people of its type of adjudication. You come across the same sort of adjudicators again and again and summer good salaamed but the pool is quite quite small so I can certainly agree with their David broadening the ability to bring in people from different jurisdictions but then of course you've got a conflict between common law and public law jurisdictions and the crossover.
Beatriz 1:05:46
This is this is a point important that you will talk about cause we have to consider so we consider if we are in a civil law, country common law is really different. I normally you know that, I think that the majority of you know that when the dispute board this mechanism was created, it was created by engineers, afford engineers but really conscious of civil war, especially when you have involved in the project that the public administration we have to have in my opinion in the boards one lawyer, not more than one but we should have one lawyer it is very useful in this kind of project.
Bill 1:06:52
I think Id agree with you I think lawyers have shown an incredible ability propensity to take over things and I agree with you that dispute boards he really should be looking for one lawyer. I liked suggestion that came up in previous discussion that if you have a standing dispute board, why not have a standing disputable which is almost a pool, so that most projects will need you need at least one engineer and a lawyer but you could have a second engineer and perhaps someone who deals with quantum programming so that you could pull down at any particular time, from your you're standing dispute board panel on a large project, three relevant people that deal with that particular issue, because if it's on you know quantum you don't really need a lawyer, unless there's an issue about entitlement but but I think we should be again I suppose taking Pauls point from earlier we need to learn and we need to be more more flexible. Has anyone got any other points that they would like to address Channel Tunnel had a panel of experts different yeah and that's Alistair that's really so the point I'm referring to that you there's no reason why large projects shouldn't have a panel with people and we should be more imaginative that on projects we're talking hundreds of millions of dollars, why do we limit ourselves to just standing dispute board as three people when a project can clearly sustain slightly larger panel that as I say can give you the most appropriate skill base in relation to any problem
Beatriz 1:08:57
I don't think we should limit it to three, you we can have more than that. It depends on the complexity of the project you can have five or seven people nominated as a dispute board members, financial reform engineers lawyers and make these people follow the conference is the beginning and maybe when you have dispute you choose three of them to care about dispute. I think we should be very flexible and choose a different solution related to the complexity of the
1:09:58 Bill
yeah I think it quite right I was also interested by the figures quite startling of factually stalled projects and to think that those figures and the information that you had all pre-covid and therefore what the rate of stalled projects must be around the world now it is really quite quite staggering so quite funny anybody go unmindful actors anybody want to ask any questions of Beatrix or Paul I don't know if all orbit tricks you've got anything else you'd like to disable if we are not getting anymore to the questions I'm sort of minded to round things up a bit well I blame my nose
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