December 1, 2006
By Owen D. Pawson and Britt Redenbach, Miller Thomson, LLP
It has been 20 years since the United States construction industry introduced partnering as a method of reducing overall costs, avoiding litigation and achieving a more positive working environment. T...
It has been 20 years since the United States construction industry introduced partnering as a method of reducing overall costs, avoiding litigation and achieving a more positive working environment. The success rate was impressive and partnering is now widely used in Canada, the United States and elsewhere.
Until recently it was generally thought that partnering charters and the mission statements issued from partnering workshops did not create or alter legal obligations. There was a dearth of judicial authority on the matter. But a recent decision of the Court of Queen’s Bench of New Brunswick suggests partnering might carry legal weight. In the 2005 case of EBC Inc. v. New Brunswick, the court found that after considering the evidence, including a partnering charter and partnering workshop, “both parties were obliged to work together in the spirit of ‘partnering.'”
What is partnering?
A large construction project typically involves many parties: the owner, a contractor, a professional designer and many subconsultants and subcontractors. Each party has a role in ensuring the project is completed on time, within budget and to the standards of quality expected in the industry. To do so, parties traditionally focused on their primary interest in performing their specific roles, often to the exclusion of anything beyond the scope of their contractual obligations. Other work was considered to be “not my job.” This attitude, combined with a keen profit motive (honed by “low bidder” tendering), often resulted in disputes. Co-operation and understanding became scarce. Adversarial positions were taken. Delay, acrimony, claims and litigation were common. Eventually, the industry began to realize that the only ones making money were the lawyers.
Such was the plight of the American construction industry in the 1980s when the US Corps of Engineers (USACE) developed partnering as a means of encouraging trust, communication and workmanship. The Corps defined partnering as follows:
“Partnering is the creation of an owner-contractor relationship that promotes the achievement of mutually beneficial goals. It involves an agreement in principle to share the risks involved in completing the project, and to establish and promote a nurturing partnership environment.
“Partnership is not a contractual agreement … nor does it create any legally enforceable rights or duties. Rather, partnering seeks to create a new cooperative attitude in completing government contracts. To create this attitude, each party must understand the objectives and needs of the other — their win situation — and seek ways that these objectives can overlap.”
The initial use of partnering in USACE government contracts proved very successful. It quickly spread throughout the United States. The Associated General Contractors of America, the Construction Industry Institute, the American Council of Engineering Companies, the American Institute of Architects and numerous other entities embraced partnering.
Partnering begins after the contracts for a project are awarded. The key parties meet with a neutral facilitator in a workshop designed to create a foundation of trust and commitment that will (it is hoped) positively affect the relationship between the parties during the project. The partnering workshop results in a written partnering “charter” which is a moral commitment by all key parties to certain objectives, including a commitment to the dispute-resolution mechanism to ensure efficient problem-solving and a periodic evaluation of the partnering process. The charter is not an “agreement” and typically states that it is not binding on the parties.
Indeed, since inception, one element of partnering has been consistent — it does not establish or replace the legal or contractual relationship between the parties. Now, the recent case in New Brunswick suggests that the partnering relationship may have a legal underpinning after all.
EBC Inc. v. New Brunswick
The EBC case arose out of the construction of a new wharf and ferry terminal. EBC, the contractor, claimed that the province’s in-house engineers were negligent in developing tender documents that identified the slip form method of construction for the caissons but without specifying a concrete mix with appropriate accelerator admixtures for winter conditions. EBC incurred substantial costs, as additional curing time was necessary and various accelerator admixtures had to be tested and determined.
The court found that the province’s engineers had innocently but negligently misrepresented that the accelerator admixtures would not be necessary. They made a mistake and the contractor relied on that information to its detriment.
In arriving at the conclusion that the province’s engineers had been negligent, the judge stated, among other things, that the partnering concepts employed on the project contradicted the provincial engineers’ reliance on the contract. The engineers therefore could not use the argument of “it was not my job” to disclose what they knew about slip forming in winter conditions. The court awarded EBC damages of approximately $147,000 for testing and the additional costs of accelerator admixtures, plus interest and court costs for a total of approximately $228,000.
The judgment in EBC is unclear as to whether the partnering charter created a binding obligation or if partnering concepts only implied a duty of good faith and fair dealing in the performance of the contract. In any event, the decision gives legal “teeth” to the partnering relationship, a relationship previously considered to have no legal effect. Given this decision, owners, and governments in particular, should carefully weigh the benefits of partnership against creating legal obligations.
Owen Pawson is a partner with Miller Thomson, LLP, barristers and solicitors in Vancouver. Britt Redenbach is an articled student with the firm.