Dispute Resolution in
Construction
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Dispute Resolution
Engineering Projects are described as:-
Adversarial,
Claim-orientated,
Claim contentious,
Fertile setting for dispute and conflict mushrooming
Dispute Resolution
Adversarial nature of engineering projects
Example - UK construction industry
1990’s – witnessed highest level of dispute
1995 – top 10 law firms specialized in construction cases made
higher profits than top 10 construction firms!
80% of the Official Referee Court was construction related.
In 500 settled claims, for every £1 recovered in compensation, £5
was spent on legal costs!
Common reasons for adversarial nature
Poor handling of claims Contract document
Adversarial Dispute Technical issue
mind-set
Poor project Project delays
management
Dispute Resolution
Alternative DR
Conventional Techniques
DR Techniques
• Negotiation
• Litigation DR Techniques • DRB
• Arbitration • Mediation
• Conciliation
• Mini-trial
• Adjudication
Dispute Resolution
Litigation
Litigation is a dispute resolution method that is
inquisitorial and adversarial, where by the
disputant initiates legal action against the other
party by going to court.
It is used when all other dispute resolution
techniques failed.
It has a win/lose outcome and rarely satisfies
both parties.
Dispute Resolution
Litigation
It is costly and results into much delay for the
disputants and may not do justice to the parties.
However, the benefit of litigation is that the court
has authority to find out the “truth” from the
parties and the enforcement of the order or
judgment is supported by other law enforcement
agencies.
Dispute Resolution
Arbitration
Arbitration is the settlement of a dispute by one
or more persons chosen by parties themselves
who are called arbitrators.
The decision is given by a regular and ordinary
court of law
Thus, arbitration is out-of-court settlement
where the arbitrator acts as a judge.
Dispute Resolution
Arbitration
The arbitrator(s) may be selected by the
disputing parties and the Award is binding
and can be enforced by courts.
The outcome is one of a win/lose situation
and is not based on any precedent(s).
Dispute Resolution
Arbitration
The decision of the arbitrator is legally
binding and, often, there is no provision
for appeal to a court of law.
There are exceptions, such as misconduct
of the arbitrator.
Dispute Resolution
Arbitration
It may take a long time, same as for a
litigation process, and may even be more
costly.
What makes it attractive is the mutual
agreement by the parties, appointment of
arbitrator, privacy and confidentiality.
Alternative Dispute Resolution
“ADR” is an alternative to the formal procedures
of dispute resolution… which ranges from
negotiation and mediation to more formalised
procedures such as adjudication.
ADR techniques originated in the U.S in 1970.
Before the coming of ADR techniques,
arbitration and litigation were widely used for
resolving disputes.
Evolution of ADR
The arbitration and litigation methods became
unpopular due to:
Increasing costs
Delays (time consuming)
Uncertainty
Promotion of adversarial nature
Parties were represented by counsel whose skills and abilities lie
in the art of arguing and scoring points over each other.
High increase in the volume of construction dispute
ADR acts as a response to the high cost and
lengthy process associated with traditional
arbitration and litigation.
Philosophy of ADR
To empower the disputants, putting them
back in control of their own disputes
To Place the disputants at the center of
the process and seek to help them to find
their own way out of an impasse.
Construction Dispute Resolution Methods
Litigation
Judge
Binding Resolution
Arbitration
Adjudication
Non-binding
Resolution
Mediation
Mini-trial
Conciliation
Standing Neutral
Dispute Review Board
Dispute Resolution Adviser
Negotiation
Direct Negotiation
Step Negotiation
Prevention
Partnering & Risk-Allocation
Construction Dispute Resolution Methods
1. PARTNERING
It is a process which aims to create a good owner-
contractor relationship from the beginning. It can lay
the foundation for better and more productive
working relationships on the project, by establishing
an atmosphere of trust and frankness in
communications.
The major objective is to encourage contracting
parties to change from their traditional adversarial
relationships to a more co-operative team-based
approach and to prevent disputes.
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Construction Dispute Resolution Methods
Partnering Cont’d
Partnering involves a workshop meeting, at the
commencement of the contract period, between all those
involved - principal, contractor, subcontractors, engineer,
etc. The meeting is managed by an independent third
party, and might for example take a full day. The
outcome is recorded.
The parties get to know each other and define common
goals, improve communication and foster a problem-
solving attitude among the group of individuals who must
work together as a team throughout the project.
After the workshop, project leaders continue to meet
(with or without the assistance of the third party) to
establish performance measures for each of the shared
objectives
Construction Dispute Resolution Methods
2. Negotiation
It is a common dispute resolution process in
which parties try to resolve the dispute without
involving any neutral third party.
It is the first resolution option when a dispute occurs
It is a private, confidential and voluntary process
agreed by both parties
In negotiations, parties approach each other for
discussions to find a mutually acceptable
outcome to the dispute.
Construction Dispute Resolution Methods
Negotiation Cont’d
As negotiation is a consensual process, it requires
willingness by both parties to attempt resolution
by this method.
If the relationship between the parties has broken
down beyond this point then negotiation will not be
possible.
The success of negotiation depends on
interpersonal communication skills of the parties
during the entire process.
Construction Dispute Resolution Methods
3. Dispute Review Boards (DRB)
It involves a panel of neutral expert persons
being set up at the beginning and therefore being
available throughout to provide an independent
assessment of the possible causes of disputes.
A DRB usually consists of three members,
selected by both the contractor and the owner
soon after the award of the contract.
With smaller contracts, the panel might be a single person,
which may be regarded as equivalent to appointing an expert
conciliator or mediator for the duration of the contract.
Construction Dispute Resolution Methods
DRB Cont’d
The DRB members are provided with the contract plans
and specifications; they become familiar with the project
procedures and the participants, and are kept informed
of job progress and developments.
The DRB meets with the representatives of the owner
and contractor during regular site visits and encourages
the resolution of disputes at job level.
The process helps the parties to resolve problems before they
escalate into major disputes.
The DRB’s recommendation for resolution of a dispute
are non-binding
Construction Dispute Resolution Methods
4. MEDIATION
Mediation is a mechanism in which a neutral third
party meets with the disputing parties (e.g.
owner & contractor) and simplifies negotiation to
help the parties to resolve their own disputes.
The mediator assists the disputants to generate
options; helping both, parties understand better
their respective positions and manage emotions.
Although the mediator controls the process, he
or she does not impose any resolution or opinion
on the merits of the case, promoting a win/win
situation, leaving the disputants themselves to
decide the outcome.
Construction Dispute Resolution Methods
5. CONCILIATION
Conciliation is a process similar to
mediation except that the conciliator can
express his opinion on the merits of the
case and is required to recommend a
solution if the parties fail to agree.
In conciliation however, the third party
(conciliator) does not always meet
together with the parties.
Construction Dispute Resolution Methods
6. Adjudication
In adjudication, the 3rd party makes a
decision and his decision is binding upon
the parties with respect to any matter in
dispute.
However, the parties may challenge his
judgment (decision) through arbitration or
litigation.
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