1 EXECUTIVE SUMMARY
Gain insight into the variations of building disputes at different stages of project development and the causes of the disputes in the building industry in order to be capable of spotting the signals of contention.
To establish how to successfully resolve building disputes. It is important to examine the variations of dispute resolutions beforehand in order to be capable of selecting the appropriate resolution.
Contractual problems are the primary cause of preconstruction stage disputes and they become a fertile ground for disputes at next stages if they have affected the relationship between the parties.
Lack of communication and experience hamper the network binding the players involved in projects by introducing dissatisfaction and a set of problems.
Building industry disputes are fairly inevitable at any stages of project development, however they are avoidable by maintaining communication and commitment to the work.
It is necessary to be aware of the strategies of dispute resolutions and their appropriateness in different situations.
2 TABLE OF CONTENTS
1.0EXECUTIVE SUMMARY 1
2.0TABLES OF CONTENTS 2
6.1WHEN DO BUILDING DISPUTES OCCUR?7
6.1.1 EARLY/PRECONSTRUCTION STAGE 7
-What are the early stage disputes?
6.1.2 CONSTRUCTION STAGE10
-Disputes during construction phase
-Management ; Job-site quality
-Whose job is it anyway?
6.1.3 AFTER COMPLETION13
-What is the problem?
-Whose duty to care?
-Who is responsible?
6.2WHY DO BUILDING DISPUTES OCCUR?15
6.2.1 LACK OF EXPERIENCE 16
-Do experienced players always raise problems?
6.2.2 LACK OF COMMUNICATION19
-Why was there a lack of communication?
-Communication in building industry
-What it does
6.2.3 UNSATISFACTORY WORK 22
-Why unsatifactory work is produced
-Level of satisfaction
6.3 DISPUTE SETTLEMENT24
-Appropriate dispute resolution?
-A need for a third party?
-Third party intervention
-How does mediation differ from other resolutions?
-Appropriate dispute resolution?
6.3.3 ARBITRARION & LITIGATION 30
-To arbitrate or litigate?
6.3.4 IS IT IMPORTANT TO RESOLVE DISPUTES?32
-Importance of resolving disputes
-Alternative forms of dispute resolutions
11.0 APPENDIX APROJECT PLAN
BSummary of Interviews
Disputes are inevitable in any human society and the essence of effective settlement is how we deal with it.
Construction problems, defeats, and accidents are inherent in the building industry and they become a fertile breeding ground for disputes
Some conflicts might be avoidable through prudent management and supervision, but other conflicts are unforeseeable.
The first aim of this research is to investigate any potential causes of disputes in building industry. As future architects, we need to be aware of these causes in order to be capable of detecting possibilities of disputes developing during the course of project development. Why are they occuring? What are the problems? When do they occur? By looking at these issues, we can indeed establish dispute prevention processes.
The second aim of this report is to discover what possible variations of dispute resolution processes are considered in our building industry. It focuses on the characteristics and limitations of each option. How do they work? What are the advantages and disadvantages of each option?
This report is based on a series of interviews conducted with various building industry players. The findings are structured around the objectives and supported by relevant interview cases and references. The methodology summarizes the method used to carry out the research and the limitation is presented before the report is completed with the conclusion.
To recognize and prevent the building industry conflicts before they escalate into major disputes ;
Examine what kinds of conflicts occur at different stages of project development.
Investigate the main problems that industry players face which might be the causes for building disputes to occur.
To settle the building industry disputes effectively once they have arisen ;
Investigate the variations of dispute resolutions
Analyze the differences of variations in order to discover the appropriate dispute resolution mechanisms.
Building industry disputes mainly start during the construction stage of project development,
Lack of experience of industry players and a lack of communication between the players are the dominant causes for building industry disputes.
Third party intervention in disputes improves the quality of the solution.
6.1 WHEN DO BUILDING DISPUTES OCCUR?
6.1.1 EARLY/PRECONSTRUCTION STAGE
WHAT ARE THE EARLY STAGE DISPUTES?
What were the causes of dispute?
It can be noted that the contract problems were the primary cause of disputes at the early stage of project development.
WHAT ARE THE PROBLEMS AFFECTING THE CONTRACT?
RELATIONSHIPS BETWEEN THE CONTRACTING PARTIES
NOMINATED AND SEPARATE SUBCONTRACTORS
A) RELATIONSHIP BETWEEN THE CONTRACTING PARTIES
The object of relationship between the contracting parties ;
The work to be done
The price taken to do the work
The time taken to do the work
Any building contract is built on these three criteria, therefore the relationship of the parties should be examined around them that suitable contract documents are used, both in the type if contract chosen and in the settling out in clear and precise terms and scope of the work and the various right and obligation of the parties.
wellK(I felt that) things were not excellent from the start..that happens..yeah it was not a good relationship really (interview 4)
The parties get to each other and define common goals, improve communication and foster problem-solving attitudeKwork together as team throughout the projectK
In their outcome, they may include
Individual and shared objectives
Means of achieving good communication, co-operation.
Specific dispute prevention processes
B) DRAWING PROBLEMS
The specifications and drawings should allow a clear understanding of the work to be performed. Contracting problems often result in the failure of the meeting of the minds of the parties through the contract documents.
..the architect/engineer may think his specification and drawings could not be clearer. The contractor may think that he understood themK
..architect argued that contractors shouldve checked the mistakes in drawings before they signed the contract..at the beginningKthen the contractors argued (that) they cant find ALL the mistakesKKshouldve raised (it) as an issue earlierK. (interview 3)
C) LATE DRAWINGS
Even though a contract contemplates the issue of drawing as the work progresses, the time when drawings are issued becomes important in the absence of any expressed term in the contract.
the difficulty in deciding a time for issuing drawings is matched by the problem of quantifying damages resulting from disruption and delay caused by the ultimate issue of drawings
Main reasons for late drawings ;
Unwise pressure by the client
Clients change of mind
..yesKthe plan changed about nine times which was extremely distressful in my opinion.. (interview 4)
D) NOMINATED AND SEPARATE SUBCONTRACTORS
The use of nominated subcontractors can give rise to serious anomalies and difficult legal problems
the difficulty arises when the nominated sub-contractors does not complete the contract V who then does, and who pay?
An architect/engineer should obtain express guarantees from the subcontractor as to the sufficiency and suitability of the design to himself and the employer.
6.1.2 CONSTRUCTION STAGE
DISPUTES DURING CONSTRUCTION PHASE
The construction phase is solely concerned with the production of the project solution.It is here that the full benefits of the co-ordination and communication earlier in the preconstruction stage may be fully realized. However, undealt or neglected conflicts in earlier stage might develop into major disputes at this stage.
Interview examples ;
INTERVIEWWHEN DID DISPUTE OCCUR?CAUSE
Interview no.2Construction stageSubcontractor fell from a roof and injured. Project manager denied his responsibility.
Interview no.1Construction stageRoofing job and the corners were not satisfactory.
Interview no.6 (dispute no.2Construction stageBuilder did not produce the correct shape of skylight window as it was in the drawing.
Interview no.6 (dispute no.3)Construction stageDelayed construction time
Interview no.5Construction stageLack of communication and poor workmanship
What were the problems that might have been the basis of dispute?
Under the poor management, with the unclear responsibilities of each player, it tends to result poor effort and less commitment to the work from the players. This unsatisfactory work will result the dissatisfaction of clients which wiil soon arise as a basis of disputes.
MANAGEMENT ; JOB-SITE QUALITY
A) FUNDAMENTALS OF A QUALITY PROGRAMME
A Quality Programme can focus on the efforts to increase the pace of work accomplished, control costs and solidify team efforts.
Essential to the successful implementaion in the construction stage ;
Strong and committed players
Involvement of everyone on the job
Clear, agreed upon lead-team work rules
B) MOTIVATING THE WORK FORCE
Just as important to the success of the quality programmes are the activities that involved the job work force at all levels ;
Recognition of effort and achievement
Formation of quality task teams
Development of task programmes
Monitoring of quality indications
WHOSE JOB IS IT ANYWAY?
..on the other hand, clients complain about dilatory contractors and contractors complain about subcontractors ; on the other hand, subcontractors complain about other subcontractors and the contractor and the architect and the client and the pimples on the dumper drivers nose..
Divided and/or unclear responsibilities not only lead to errors or emisions, but can also add significantly to the time and cost involved in sorting out conflicts, since the responsibility for tackling them tends to get debated at the same time.
..because they couldnt sort out whose fault it was.. the argument went on and on.. no they didnt do the reconstruction because of time delay as well as the cost of material of course.. (interview 6,dispute no.2)
A) CLARIFICATION OF RESPONSIBILITIES
Factors which should be clarifies:
Nature of the work to be done by each player
How long it will take
What it will cost
Discussion about variations (i.e price change)
Understanding of rights and responsibilities
6.1.3 AFTER COMPLETION
..upon completion of the construction phase, the process protocol continues into the postconstruction phase, which aim to continually monitor and manage the maintenance needs of the constructed facility
WHAT IS THE PROBLEM
Two main issues arise as a ground for disputes after the completion ;
Maintenance & refurbishment problems
Owner vs Builder
No one cares too much about maintenance until things go wrong
Even though this may be generally true, it does not cause too much of a problem at the very small end of the building market, nor at the large owner occupied end where the owner is big enough to have his own maintenance team.
We are thus left with the huge middle ground where the owner/builder passes on responsibility to the occupier. Then, the problems start to arise questioning whose duty is it to care.
WHOSE DUTY TO CARE?
The owner of a building replaces the guttering and downpipe on their property by using an independent contractor to carry out work and it causes damage to the neighbouring property
The independent contractor was not liable for damages
The owner who had a central element of control over land was liable in negligence.
Mr X who is a professional builder built his own family home then sold it to Mr&Mrs Z. Five years later Mr&Mrs Z had problems with blockages in the sewerage system.
It was found that Mr X s plumber had not installed a boundary trap when the house was built.
The builder owed a duty to care to the purchaser of the house.
WHO IS RESPONSIBLE?
Disputes discussed previously about the responsibilities for defeats in a building are summarized as ;
A purchaser would be likely to place general reliance on the builder of building.
A builder owes a duty of care to a purchaser of a house even when the purchaser is not the original purchaser.
6.2 WHY DO BUILDING DISPUTES OCCUR?
..disputes include problems caused by inefficent management by either party, inadequacies in briefing, failure of programming, late issue of drawings, mistake on drawings, over-zealous supervision, poor communicationK..
WHY DID DISPUTES OCCUR?
From the interview conducted throughout the research process,It is important to note that lack of experience of players, unsatisfactory work and lack of communication were the primary causes of building disputes.
6.2.1 LACK OF EXPERIENCE
Clients expectation according to architect/facilitators experience in building industry
INEXPEIENCEDHAD SOME EXPERIENCEVERY EXPEIENCED
-Help in understanding drawings
-ideas to choose from
-keeping client informed
-responsibility reports on process
-advice on economy-organizing ability
Even though the expectations of the clients vary according to the architect/facilitators level of experience, disputes can occur more easily with the ones with less experience because of :
Lack of their ability to detect problems quickly
Their experience with only a small number of clients so far (= less ability to deal with differences of each client)
they were under-experiencedKthey had to come back and redo the workK. But did no better (interview 1)
I assumed (that) she knew about thatK I thought there was no need for notifying that infoK (interview 4) : architect with 2years of experience
A) CLIENTS KNOWLEDGE OF BUILDING INDUSTRY THROUGH EXPERIENCE
(interview no.8 )
The owner hired excavators from a newspaper advertisement
The excavators did not turn up after one day of working
The lack of experience of owner in building industry resulted the dispute
The owner ended up paying the labour charge for one day even though another team of excavators was hired.
Many clients, whether private, coporate or public cannot be expected to have the necessary experience and knowledge in Vhouse to feel capable of directing a building project, without the benefit and support of professional project management advice and assistance.
DO INEXPERIENCED PLAYERS ALWAYS RAISE PROBLEMS?
INTERVIEWPLAYERSDISPUTE BETWEEN WHICH PLAYERS
Interview no.8Owner : no experienceOwner vs excavators
Interview no.1Owner : no experience
Builder : very experienced (35 yrs)
Labourer : some experience Builder vs labourer
Interview no.4Owner : no experience
Architect : no experience (2yrs)Owner vs builder
Interview no.5Owner : no experience
Builder : no experience Owner vs builder
Interview no.6 Owner : no experience
Architect : some experience (7yrs)
Builder : some experience (9yrs)Architect vs builder
Owner vs builder
Interview no.3Architect : some experience (5yrs)
Contractors : very experienced (15yrs)
Architect vs contractors
Interview no.10 Architect : very experienced
Builder : very experiencedArchitect vs builder
As it is shown above, inexperienced players in building industry do not necessarily raise disputes all the time. However, inexperienced players tend to get involved in conflicts and disputes more easily when another player in the project is also inexperienced.
6.2.2 LACK OF COMMUNICATION
Whether it is understanding the clients needs, getting something done right or just establishing responsibilities, lack of communication is the root of disputes in building industry.
..lack of consultation and poor project feedback are among the primary causes of defeats in construction..
WHY WAS THERE LACK OF COMMUNICATION?
accessibility is the ease to contact each other after the different parties parted physically. It ensures that the effective communication can be maintained.
LACK OF TIME :
..(I) guessed (that) everyone was busy going on with their work.. (interview 10)
a sense of personal connection, through smiling, eye contact, open stanceK
LANGUAGE PROBLEM :
The players who came from different cultural backgrounds may find it difficult to communicate effectively.
COMMUNICATION IN BUILDING INDUSTRY
A) THE NETWORK BINDING THE PARTIES
B) WHAT IT DOES
Communication in the broad sense takes many forms- :
Contact documents such as -agreements
Basis for exchange of information
Establishes a clear working relationship between players/parties
Encourages involvement of players in a project
Good communication is of course essential to customer satisfaction
6.2.3 UNSATISFACTORY WORK
REASONS OF DISSATISFACTION WHICH WERE THE BASIS OF DISPUTES FROM THE INTERVIEW ARE SUMMARIZES AS;
Dishonesty : ..builder tried to get away with whole lot of things changing things to make more moneyK ( interview no.10)
Future quality of building not assured
Ignoring instructions and requests
Poor workmanship : ..yes poorly constructed..and poorly finished.
Exceed time frame
WHY UNSATISFACTORY WORK IS PRODUCED?
Unsatisfactory work is mainly produced because of a set of problems such as poor management skills, misunderstanding and players not being committed to the project completely.
PROBLEMS PRODUCING UNSATISFACTORY WORK :
Lack of involvement
Lack of communication
A set of reasons could be listed as above, indicating primary causes of unsatisfactory work, but unsatisfactory work itself could be the result of disputes. Thus, exceeding the planned time frame might produce unsatisfactory work because of the pressure on the limit, but the delay might have been cause by the time taken for settling a dispute which has arisen beforehand.
LEVEL OF SATISFACTION
The three factors that most influence the level of satisfaction are:
an important principle to be established at the outsetK.is the relative importance to the client of quality,cost, and time. If the clients main objective is to complete the building quickly, this factor should be predominant in the architects decision-making
6.3 DISPUTE SETTLEMENT
..the parties try to settle them, but frequently fail. This may be because of poor communication, lack of understanding, or simply because they are too busy getting on with the work
PRIMARY DISPUTE RESOLUTION PROCESSES ;
Voluntary / InvoluntaryInvoluntaryVoluntaryVoluntaryVoluntary
Binding / NonbindingBinding, subject to appealBinding, subject to appeal / review on limited groundsIf agreement reached enforceable as contractIf agreement reached enforceable as contract
Third partyImposed, third-party neutral decision-maker, generally with no specialised expertise in dispute subjectParty-selected third-party decision-maker(s), often with specialised subject expertiseParty-selected outseide facilitatorNo third-party facilitator
Degree of formality Formalised and highly structured by predetermined, rigid rulesMay be procedurally less formal ; procedural rules and substantive law may be set by partiesUsually informal, unstructuredUsually informal, unstructured
Nature of proceedingOpportunity for each party to present oral evidence and legal argumentsOpportunity for each party to present oral evidence and legal arguments but parties may agree otherwiseUnboundede presentation of evidence, arguments and interestsUnbounded presentation of evidence, arguments and interests
OutcomePrincipled decision, supported by reasoned opinionSometimes principled decision supported by reasoned opinion; sometimes award without opinionMutually acceptable agreement soughtMutually acceptable agreement sought
Private/PublicPublicPrivate, unless appeal/review sought in CourtPrivatePrivate
THE APPROPRIATE DISPUTE RESOLUTION?
A) WHY DO WE NEGOTIATE?
No time delay for legal porceedings
Privacy and independence retained
No win/lose philosophy associated with litigation is applied
B) A NEGOTIATION STRATEGY
It focuses on satisfying as many as possible of the important needs and interests of the parties. A successful outcome usually improves the relationship between the parties and leaves them in better position to deal with any future differences.
anywayKarchitect admitted his fault and agreed to redraw the working drawing..yeah that was...pretty much the end of it. (interview no.6 Vdispute no.1)
discussions mainly..enough discussions for understanding..
interview no.6 Vdispute no.1)
A NEED FOR A THIRD-PARTY?
A) THE LOSING PARTY
Disputants usually begin by concentrating al their energies on winning. The word compromise has a negative connotation, involving concessions, loss to everyone, manupulation and an inferior outcome.
she refused to payKthere was a compromise on the payment..well I tried to sue, but the value of the contract was too small.. (interview no.6)
..I ended up paying both parties..I just wanted the things to be done..
..the owner compromised because he didnt like arguingKthe builder wasnt that interested because the owner wasnt complaining loudly enough..yeah the owner was the real loser. (interview no.1)
B) DIRECT NEGOTIATIONS MAY ONLY CONTINUE TO FIGHT
Direct negotiation between disputants without a third party allows the parties to retain their privacy and independence, but also has serious liabilities. It can heighten power differences and intensify the confrontation. Any compromise reached may merely become the basis of future conflicts..
When we are locked into either-or thinking, our logic has a fundamental limitation.More effective means of resolution inevitably come from a third party.
K.no that was not fast..AND that was not easy..and who is responsible for the time delay? (interview no.5)
Genuine building failures is the area where disputes are best settled by mediation and where the courts are least appropriate
Mediation is negotiation with the assistance of an impartial person with no state in the issues in dispute. Negotiaions are often difficult to organize and conduct successfully. As a result, mediators are called upon to help parties convene negotiations, to prevent impasse during the negotiations, or to assist parties to continue when their discussions have broken down.
THIRD PARTY INTERVENTION
A) THIRD PARTY INTERVENTION OFFERS ALTERNATIVES AND HOPE
A third party mediator can introduce an intervention to break the negative cycle.
A third party mediator can provide the disputants with alternative and additional information, experience and expertise
A mediator invites and ensures full participation and communication between the parties.
Kconfidential matters and interests can be explored, and the mediator will only divulge information to the other party with consent
B) THE ROLE OF THE MEDIATOR
To guide the process so that the issues are defined and relevant information is produced and options are explored
To remove psychological barriers and enable the parties themselves to negotiate meaningfully.
C) MEDIATIONS BENEFITS
Creative solutions are optical
Mediation is a win-win situation
Most cases are settled in hours or days, not months
There is rarely any cause to re-visit the issues since the terms of the agreement are voluntarily drafted by the parties themselves.
HOW DOES MEDIATION DIFFER FROM THE OTHER RESOLUTIONS?
Kare negotiations confidential?KKKK..mediation resolve matters behind closed doors, provided the terms by which the mediation is held are clarified beforehand
B) ARBITRATION AND LITIGATION
MEDIATIONARBITRATION & LITIGATION
Introduction of any evidence is possibleImpossible in court
Minimise legal costLegal cost exists
Mutually acceptable agreementDecision made by the court or the arbitrator based on evidence following strictly determined rules
IS MEDIATION THE APPROPRIATE DISPUTE RESOLUTION?
A) ACHIEVING JUSTICE
the loss of avenues for dispute negotiation outside the court system has limited opportunities for maintaining relationship and achieving justice in modern societies.
B) ENFORCEABILITY OF AN AGREEMENT TO MEDIATE
mediation is essentially consensual and the opponents of enforceability contend that it is futile to seek to enforce something which requires the co-operation and consent of a party when co-operation and consent cannot be enforced. The proponents of enforceability contend that this misconceives the objectives of alternative dispute resolution, saying that the most fundamental resistnace to compromise can wane and turn to co-operation and consent if the dispute is removed from the adversarial procedures of the Court and exposed to procedures designed to promote compromise..
6.3.3 ARBITRATION & LITIGATION
Arbitraion is the process by which a dispute or difference between two or more parties as to their mutual legal rights and liailities is referred to and determined judically and with binding effect by the application of law by one or more persons instead by a court of law
A) KEY FEATURES OF ARBITRATION :
It is a consensual process, based on agreement of the parties
An agreement to arbitrate will be enforced by the State pursuant to arbitration statutes
An arbitral award will also be enforced by the state pursuant to arbitration statutes which authorise the use of standard civil procedures available for the enforcement of judgement
B) ADVANTAGES OF ARBITRATION
Arbitration has the advantages of secrecy, informality and usually of finality ; also technical expertise if the arbitrator is an expert.
litigation is, on the whole, a good method of settling disagreements about what the terms of a contract are and/or whether one of the parties to it has failed to comply with its terms.
A) ADVANTAGES OF LITIGATION
One of the advantages of litigation is the ease with which further parties may be brought in, a feature often impossible in arbitrations. Thus a builder defend out may want to counterclaim not only against the plaintiff building owner but also against the architect, or he may want to pass on the claim to a subcontractor as third party.
TO ARBITRATE OR LITIGATE?
It can only provide a remedy for the injured party if the court finds that there has been a breach of the contract. This can be a serious limitation in constructionA party with a claim against which there is no arguable defence cannot obtain court where an arbitration agreement is in existance.
Multi-party cases are being stayed to arbitration, judges could exercise the discretion available to them under the act no to.
B) ARBITRATION BEFORE LITIGATION
Ka huge proportion of construction industry disputes are decided by arbitrators. Such men and women are often surveyors, engineers or architects first, and part-time arbitrators secondK. Let us please have the benefit of knowing how all these arbitrators and lawyer arbitrators handle and decide the everyday issues.
6.3.4 IS IT IMPORTANT TO RESOLVE THEM?
IMPORTANCE OF RESOLVING DISPUTES
Unsolved disputes undermind construction projects and hamper their successful completion. The parties simply cannot wait for delayed resolution without harming the project.
A) UNSOLVED DISPUTES TEND TO :
Delay remedial measures
Increase legal costs
Waste resources unnecessarily
Sap the energies of the parties, diminishing their ability to function effectively
B) NEGATIVE EFFECTS ON THE NEXT STAGES
..because of the time and cost of the material.. the owner decided that simplest way was to move onto next stepKyes it should have been raised as an issue and shouldve been dealt with..
(interview no.6 V dispute no.2)
ALTERNATIVE FORMS OF DISPUTE RESOLUTIONS
A) LEGAL ADVISER
Legal advisers can be expected to provide advice :
On structuring a clients affairs so as to reduce the possibility of disputes arising
Whether in advance or any dispute arising or alternatively after that dispute has arisen, as to the appropriate mechanism or mechanisms to be used to resolve that dispute.
B) MEDALOA (MEDIATION AND FINAL OFFER ARBITRATION)
This is a process provides for mediation. However, if the amount of money involved is not agreed by the parties, they each make one final offer in writing. The mediator then becomes arbitrator and choose one or other of the offers and issues an award accordingly.
In building industry, disputes can start even before the physical work commences, for ambiguous clauses, variation issued between the contract being signed and the work commences, drawing still arriving from the architect simply lead to conflict situations before any work is commenced.
Whether it is the ambiguity of statements or misconception of duties or misunderstanding of intention or simply the lack of experience of player, the disputes are inevitable at any stage of project development or even after the completion.
On whatever grounds a dispute arises, it can be surely avoided by maintaining clear communication, resolving issues before a problem turns into a dispute, and clarifying all rights and responsibilities of each player involved in the project. All players involved in a project should be completely committed to the work throughout the project so that the signals of contention could be spotted and anticipated disputes can be avoided.
Every dispute can be resolved one way or another. To avoid deadlock, it is most important to communicate with someone who has the appropriate level of authority to deal with disputed matters. It is also necessary to be aware of strategies for removing different kinds of impasses which may be formed by strategic positioning, emotion, or incomprehension.
The appropriateness and cost of action, and the implications of failure V in time, effort, money and stress- implicit in different types of third-party resolution, must be examined and understood.
However, whether there are avoidance/resolution mechanisms or not, disputes are unstoppable in any building industries. It is for us, as future professionals working in building industry, to examine the nature of building disputes in order to tackle them more effectively.
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