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CONSTRUCTION DISPUTE

GROUP : LIZA

DEFINITION OF DISPUTE

THE GENERIC TYPES OF CONSTRUCTION

DISPUTESSSPECIFIC SOURCES OF CONSTRUCTION

DISPUTE

SSPECIFIC SOURCES OF CONSTRUCTION

DISPUTE

CRITICAL FACTORS AFFECTING THE USE

ADR PROCESSES

CRITICAL FACTORS AFFECTING THE USE

ADR PROCESSES

HIERARCHY DISPUTE RESOLUTION PROCESSES

HIERARCHY DISPUTE RESOLUTION PROCESSES

TABLE OF CONTENT

DEFINITION OF DISPUTE

i. Dispute is a misunderstanding between two parties, either contractual or non- contractual (Oxford Dictionary)

ii. Definition of the dispute may be circumscribed it may inevitably involve resolution of other matters which may not specifically have been raised into separate or discrete disputes.

iii. The judicial development of the definition of dispute required to give an adjudicator threshold jurisdiction has been instrumental in encouraging the Parties to exchange views and facts which support their case, but it can be a rather blunt instrument for reducing dispute and far short of a pre- adjudication protocol (Construction Law Handbook, 2007).

Example:i.Contract Documents ii.Agreement

Example:It involvesdisagreement over issues capable of resolution by negotiation, mediation or thirdparty adjudication

A dispute defined as a class or kind of conflict, which manifests itself in distinct, justifiable issues.” (Brown and Marriot (1993)).

OTHER DEFINITIONS DISPUTE

Dispute is unable to eliminate because the nature of the construction is full risk.(Thomas 1995)

A dispute will not exist until a claim is asserted by one party which is disputed by the other party (Bachner (1988))

Example:The designer would not agree when they have made a blander in their designs but there will always put the blame with the contractor, claiming he is failing to do his work.

VISULIZE ACTIVITIES WITH TIMELINES!

Changes and vibration requirements

Changes to standard condition of contract

Late payment to contractor

Poor planning and programming

Poor briefing during design stages

Poor standard of work

Delay payment to subconttractor

Lack of appropriate competence

and experience

Late issue of information/ drawing

Design inadequacies

CONSULTANT

CLIENT CONTRACTOR

CAUSES OF DISPUTE BY STAKEHOLDERS

Causes of Construction Dispute by Clients

DISPUTEDeficient management supervision

Failure to respond in time

Poor communication

Lowest price menitality in engagement of contractor

Failure to appoint project manager

Discrepancies in contract documents

Causes of Construction Disputes by Contractors

DISPUTE

Delay suspension of work

Failure to plan and execute the changes of works

Reluctance to seek clarification

Inadequate CPM scheduling and update requirement

Lack of understanding and agreement in contract procurement

Failure to understand and correctly bid or price the works

Causes of Construction Dispute by the Consultants

DISPUTE

Failure To understand its responsibilities under the design team contract

To request for information late information delivery and cumbersome appoarch

Over design and understanding the costs involved

Incompleteness of drawing and specification

Design and specification oversight and errors or omissions from specialists

Varistions due to design errors

THE GENERIC TYPES OF CONSTRUCTION DISPUTES

i. Whitfield (1997) who identifies as the more common cause such as misunderstandings and poor communications, personal and cultural values and professional ethics,

diverging interest and personalities of individuals.ii. The complexities of the design and construction process, the customary practices and relationships that are created on a project. Others are formed through the constraints or influences of people and organization external to the client and project team example end users, planning and building authorities, adjoining owners and utility undertaking.

In Table, Fenn et al (1997) provides a synopsis of the findings of nine frequently cited studies of the sources of disputes.

RESEARCH SOURCES OF DISPUTE

Bristow and Vasilopoulous (1995) Six areas: Unrealistic expectations, ambiguous contract documents, poor communication, lack of team spirit and changes

Conlin et al. (1996) Six areas: payment, performance, delay, negligence, quality and administration

Diekmann et.al (1994) Three areas: people, process and project

Health et.al (1994) Seven areas: contract terms, payment, variation, time, nomination, renomination and information

Hewit (1991) Six areas: Changes of scope, changed condition, delay, disruption, acceleration and termination

Kumaraswarmy (1996) Two areas: root causes and proximate causes

Rhys Jones (1994) Ten areas: management, culture, communication, design, economics, tendering pressures law, unrealistic expectations, contract and workmanship

Semple et al. (1994) Four areas: acceleration, restricted access, weather and changes of scope

Sykes (1996) Two areas: misunderstanding and unpredictability

1. Owner's failure to pay for work or lacks funds to continue work: We work with contractors find legal relief where an owner has failed to pay. From extending the substantial completion date (SCD), pursuing a claim for increased costs (including the cost of mobilization and de-mobilization) seeking change orders or and enforcing liens, we can assist you in getting the amounts you are owed.

2. Unforeseen site conditions: Many issues can arise during the course a project, such as disputes with neighbors during foundation work, hitting water or having insufficient personnel on the job, can cause significant and costly delays. We will advise you about the legal action you can take to protect your rights if you encounter a situations not anticipated in the contract.

3. Stop work orders issued by the Building Department: Stop work orders can be issued for a variety of reasons, from safety issues on the job site to failing to protect adjacent property and failing to have proper controlled inspections to working without proper permits. We are experienced in handling these types of delays and will work with the Building Department to resolve the matter as promptly as possible. Helping you move forward with project completion is our goal.

4. Breach of contract by any party: When a party fails to perform their contractual obligations, we will help you seek enforcement of the contract or compensation for damages. Whether the dispute is over payment, the quality or scope or work performed, failure to correct defective work, liens filed by subcontractors or suppliers, or wrongful termination of the contract, rely on us for assertive and experienced representation.

Many types of construction disputes, including:

A survey of more than 300 construction dispute in the USA leads to the conclusion that their causes can be largely traced to five sources (H. Murray Honds 1979):i.Errors, defect or omissions in contract documentsii.Underestimation of the cost – by the client, the construction or bothiii.Changes in conditions e.g. unforeseen ground conditionsiv.Claims from end-users (legal right of the owners and tenants)v.People involved in construction process

Research Sources of Dispute

Mitropoulos

Project Uncertainty; Contractual Problem; Opportunistic Behavior; Contractors financial

position ad cost of conflict and culture

Spittler

Ambiguous contract documents; competitive/adversarial attitude and dissimilar perception of

fairness by the participants

Booker Payment, delay, defect/ quality and professional negligence

SheridanValuation of variations; valuation of final account and failure to comply with payment previous

Yate

Variations; ambiguities in contract Document; inclement weather; late issue of design

information; delayed possession of site; delay by other contractors employed by the client and

postponement of part of the project

Hewit Change of Scope, Change Conditions, Delay, Disruption, Acceleration & termination.

SOURCES OF CONSTRUCTION DISPUTES

INCONSISTENCIES IN CONTRACT

DETERMINATION OF CONTRACT

SETTLEMENT AGREEMENT

BENEFITNATURAL OF PROCEEDING

OUTCOME OF THE

PROCESSPROCESS OF PROCEEDING

CRITICAL FACTORS AFFECTING USE ADR PROCESS

CRITICAL FACTORS AFFECTING USE OF ALTERNATIVE DISPUTE RESOLUTION

PROCESSESSIGNIFICANT

1. SETTELEMENT AGREEMENTa) Bindingness of the decision (Bindingness)b) Enforceability of the decision (Enforceability)c) Obtaining fairness (Fairness)

2. BENEFIT a) The cost involved (Economy)b) Preservation of relationship (Relation)

3. NATURE OF PROCEEDINGa) Confidentiality of the process

(Confidentiality)b) Privacy of the proceeding (Privacy)

4. OUTCOME OF THE PROCESSES a) Obtaining creative remedies ( Remedy)b) The width of the remedy ( Remedy)

5. PROCESS OF PROCEDING

a) The parties ability to control over the proceeding (Control)

b) Flexibility of the proceeding ( Flexibility)c) The duration of the proceeding (Spped)

The three attributes as extracted significant:

Factors 1 are:1.Bindingness To the settlement Agreement

2.Enforceability obtained in ADR process

3.Fairness

Factor 2 consists of the:1.Attributes Address the benefit that 2.Economy result from a successful ADR 3.Preservation of Relationship process

Factor 3 includes:1.Confidentiality Relate to the nature of the proceeding2.Privacy to avoid dispute becoming know to public

Factors 4 are:1.Remedy2.Creative Solution attributes extracted

Factor 5 consists of three attributes:1.Flexibility2.Control3.Speed

HIERARCHY OF DISPUTE RESOLUTION PROCESSES

NEGOTIATION

STANDING NEUTRAL

NON-BINDING RESOLUTION

BINDING RESOLUTION

LITIGATION

LINE OF INCREASING COST & ANTAGONISM

ADR M

ETHO

DS

Favorable DRS Adverse DRS

e.g.: Adviser, Dispute Review Board

e.g.: Mediation, Mini trial, Adjudication

e.g.: Arbitration

The stair step of Figure above depicts the dispute resolution methods currently commonly used in the construction industry.• The hierarchy start with the prevention techniques. The use of prevention techniques aims at creating teamwork and harmony, thereby preventing dispute from arising.• Equitable risk sharing and incentive for cooperation are usually initiated by client, whereas the success of partnering relies on contributions from all parties involved in the construction process. • Prevention techniques do not guarantee total dispute elimination. Problems cropping up during construction still need to be resolved.

Step 1:Resolving construction problems start with negotiation between the disputes. In negotiation, the parties have absolute freedom with respect to the form, process and type of agreement. Negotiating construction problems demand cooperatives effort from the disputants.

Step 2:If negotiation fails, the disputants may choose to seek assistance from a neutral third party. There are two possible formats, the standing neutral and non- binding resolution. The standing neutral concept involves the participation of a neutral person adjunct to the construction phase of a project, solving problems at the sources.

Step 3:Alternative Dispute Resolution techniques such as mediation, mini-trials and adjudication are typical examples of non-binding resolution. Beyond this stage, position become more polarised and costs to both parties begin to mount.

Step 4:If the dispute not resolved amicably through ADR procedures, next step is refer the dispute to a third party for a binding decision. Typically is a giant step, involving formal identification of opposing position and issues. These require considerable preparation by the parties, with assistance of lawyers, consultants and expert witnesses. Arbitration is by far the most commonly used method to resolve construction dispute.

Step 5:The top end of the stair step is litigation. Litigation is a rigidly regulated process, the process is subject to the rules and procedures set out by the court. By adopting the litigation route, the parties surrender their control over the process and the outcome will be imposed by the third party.

IMPACT OF CONSTRUCTION DISPUTES

IMPACT

Additional expense in management and

administration

Possibility of litigation cases

Loss of company reputation

Loss of profitability and perhaps business viability

Time delays and costs overruns

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