civil engineering practice (lec 5)

CONTRACT DISPUTE RESOLUTION TECHNIQUES

11-04-20121

LECTURE-5

CONTRACT DISPUTE RESOLUTION TECHNIQUES

Construction Claims Construction contracts are seldom ideal, and

claims for time extension or financial compensation often have to be made by one party on another.

Claim analysis has become an important issue for project management

Typical construction claims against owners• Scope changes• Change orders• Work suspension and stoppages• Site access or availability• Strikes etc.

Typical construction claims against the contractor

• Materials out of specification• Defective work• Property damage• Contractor’s late completion

Disputes

The best practices for resolving construction disputes include a combination of: dispute prevention, flexibility, early dispute intervention, use of alternative dispute resolution methods, and a predetermined plan as to how disputes will be handled.

Contract Dispute Resolution Techniques

Disputes

The various types of dispute resolution methods used in construction disputes are:Tradition Techniques Litigation NegotiationAlternative dispute resolution Technique (ADR) Arbitration Mediation Expert determination Dispute Review Boards Rent a Judge

Contract Dispute Resolution Techniques

Most construction disputes are tried in one of the state judicial systems.

A particular state court gains jurisdiction over a case if one of the parties is based in that state or if the project itself is located in that state.

If the two parties to the dispute are based in different states, whichever party initiates the litigation chooses the forum.

Litigation

Litigation usually refers to the process of submitting matters for resolution to the courts of the provinces, or in some instances, the federal court system.

Litigation usually occurs because:

The amount of damages is large One or more parties refuses to negotiate a

solution The issue is complex A court-ordered solution is the quickest solution Litigation will not affect the project schedule

Contract Dispute Resolution Techniques

DISADVANTAGES OF LITIGATION:

A complex construction dispute may take anywhere from 1 to 2 years before it reaches trial.

The prolonged and detailed process makes litigation very expensive.

Contract Negotiations Another way of resolving construction

disputes is by holding negotiations Between the two parties without neutral party It is one of the most-tried methods and most-

successful too Negotiations are quite simple and can be done

over the telephone, by email or letters, at a meeting or even through mediation which is, another form of alternative dispute resolution.

Contract Dispute Resolution Techniques

Skills Necessary for a negotiator

Preparation and Planning skills Knowledge of subject matter Ability to understand the interest of the firm Ability of persuade others Good listening skills Patience Ability to control emotions Ability to maintain flexibility

Contract Dispute Resolution Techniques

Arbitration

In arbitration, each party in a dispute agrees to submit evidence to a neutral third party to review and render a judgment of responsibility.

Arbitration is less costly and time-consuming than litigation, but has fallen out of favor because it is still more expensive and slower than mediation or conciliation.

Arbitration may be binding or non-binding, depending on the contract provisions.

Contract Dispute Resolution Techniques

Mediation

Mediation is a voluntary negotiation between the parties in a dispute, aided by a neutral third party (the mediator).

The mediator’s role is to assist the parties to find their own solution.

Mediation is mentioned as the desired form of problem resolution in agreements, and is faster and less costly than arbitration.

Contract Dispute Resolution Techniques

ADVANTAGES OF MEDIATIONFastInexpensiveConducted by expertsConfidential and convenient

DISADVANTAGES OF MEDIATION Mediation is non-bindingIf an agreement cannot be worked out, the mediation proceeding will have been a waste of time and money.

Expert Determination

Some disputes are of such a nature that they can be resolved through objective testing or the opinion of an expert.

Environmental and material testing issues are examples of problems in which both parties may voluntarily conclude that they will accept the judgment or report of an independent agency.

Contract Dispute Resolution Techniques

Dispute Review Boards

Dispute Review Boards

The DRB method of dispute resolution was developed by the committee on contracting practices of the underground technology research council of ASCE.

The DRB comprises three members: one selected by the owner, one by the contractor, and a third selected by the first two.

All DRB members are impartial and experienced in construction. They are appointed soon after the contract is awarded

Contract Dispute Resolution Techniques

DRB members are sent progress reports and visit the project periodically.

The DRB is not used for routine claims or differences of opinion, but for the resolution of major problems.

The recommendations of the DRB are not legally binding, but are not likely to be reversed in litigation.

ADVANTAGES OF DISPUTES REVIEW BOARDSThe DRB hears disputes on an informal basis and can provide recommendations for their timely resolution before parties adopt hard positions leading to litigation.The parties are comfortable with the recommendations of the DRB since the selection of the DRB members is controlled by the owner and the contractor. Because they meet periodically and they are sent progress reports, the DRB members are familiar with the elements of the project.

Although the DRB recommendations are not binding on either party, there is strong motivation to accept the findings

DISADVANTAGES OF DISPUTES REVIEW BOARDS The impartiality and conflict-of- interest portion

of the DRB specification is so tough that sometimes there are not enough qualified people for the DRB.

The project must be large enough, and the probability of the occurrence of disputes throughout the course of the project must be high enough to justify the expense of retaining the services of the DRB members for the entire duration of the project.

Rent-a- Judge Hire ex- judge or lawyer to give binding or

non-binding decision

Contract Dispute Resolution Techniques