III
MANAGING CONTRUCTION DISPUTES
CALEB DUMISA MOTSA
A master’s report submitted as a partial fulfillment of
the requirement for the award of degree of
Master of Science (Construction Management)
Faculty of Civil Engineering
Universiti Technologi Malaysia
November, 2006
V
ACKNOWLEDGEMENT
I would like to express my sincere gratitude and grateful appreciations to my supervisor,
Dr Rosli Mahamad Zin for his invaluable guidance, advice, encouragement and help
throughout the project. Without his advice and constructive ideas this report wouldn’t be
successfully accomplished.
A special acknowledgement must be given to my sponsor the Common Wealth
Scholarship under the Government of Malaysia, for their financial support throughout
this project.
VI
ABSTRACT
Construction projects are increasingly complex, resulting in complex contract
documents. Complex construction can likewise result in complex disputes. Disputes is
inevitable in construction projects which predominantly arise from complexity and
magnitude of works, multiple prime contracting parties, poorly prepared and/ or
executed contract documents, inadequate planning, financial issues and communication
problems. Any of these factors can overturn a project and lead to complicated litigation,
arbitration, mediation, time overrun, increased costs and a relationship break down
among members of different parties involved. The objectives of this study are to identify
the root causes of construction disputes as well as their impact on client’s organization.
The methodology of study adopted was through questionnaire survey where the target
respondents were clients, consultants and contractors. Based on the analyzed data, there
are nine root causes of construction disputes caused by clients, five root causes caused
by consultants and four root causes caused by contractors have been identified in the
local construction industry. The impact of construction disputes in client’s organization
as found in the study are time consuming, cost effective, loss of reputation and sour
relationship between stakeholders and also loss of profit and business validity. ADRs
were observed as the best method of resolving disputes because they were identified as
none time consuming and cost effective. From the findings it can be concluded that
construction disputes are a cause of concern in every project and the solution to this
problem is to avoid and cautiously manage them for smooth running of construction
process, prevention is believed is better than cure.
VII
ABSTRAK
Projek pembinaan masa kini didapati semakin rumit dan kompleks, di mana ini
sedikit sebanyak turut menyebabkan dokumen kontrak juga menjadi semakin rumit dan
kompleks. Projek pembinaan yang kompleks ini juga menghasilkan pertelingkahan yang
kompleks. Pertelingkahan adalah sesuatu yang tidak dapat dielakkan kerana ia pada
asasnya timbul disebabkan oleh keadaan kerja yang kompleks serta magnitud kerja-kerja
tersebut, selain pengelibatan ramai pihak di dalam sesebuah kontrak, kualiti yang kurang
memuaskan dalam penyediaan dan penggunaan dokumen kontrak, perancangan yang
tidak mencukupi, isu-isu kewangan serta masalah-masalah komunikasi. Salah satu
daripada faktor-faktor tersebut sudah mencukupi untuk menggagalkan sesuatu projek
serta menyebabkannya menghadapi proses-proses rumit yang melibatkan perundangan,
timbangtara, dan mediasi, di samping menyebabkan kelewatan penyiapan projek,
peningkatan kos keseluruhan projek serta menjejaskan hubungan di kalangan pihakpihak yang terlibat dalam projek tersebut. Objektif bagi kajian ini adalah untuk
mengenalpasti penyebab utama pertelingkahan di dalam projek pembinaan selain
mengenalpasti impaknya terhadap organisasi klien. Metodologi yang digunakan di
dalam kajian ini adalah melalui borang soal selidik di mana responden-respondennya
terdiri daripada pihak klien, perunding projek serta kontraktor. Berdasarkan kepada datadata yang telah dianalisis, di dalam industri pembinaan tempatan, dikenalpasti terdapat
sembilan penyebab utama pertelingkahan di dalam projek pembinaan berpunca daripada
pihak klien, manakala lima lagi penyebab utamanya adalah berpunca daripada pihak
perunding projek serta empat lagi penyebab utama pertelingkahan di dalam projek
pembinaan adalah berpunca daripada pihak kontraktor. Impak pertelingkahan di dalam
projek pembinaan bagi organisasi klien yang dikenalpasti melalui kajian ini adalah ianya
memakan masa, menelan belanja, hilangnya reputasi dan mengakibatkan hubungan yang
renggang di kalangan pihak-pihak yang terlibat, selain mengakibatkan kerugian serta
melemahkan perniagaan yang dijalankan. ADR didapati merupakan kaedah yang terbaik
untuk menyelesaikan pertelingkahan kerana ia didapati tidak memerlukan masa yang
panjang serta kosnya yang efektif. Daripada hasil kajian, boleh disimpulkan bahawa
VIII
pertelingkahan dalam projek pembinaan adalah sesuatu yang dititikberatkan dalam
perkara kajian dan penyelesaian bagi masalah ini adalah dengan mengelakkan
pertelingkahan bermula serta langkah-langkah awal untuk menguruskannya agar projek
pembinaan dapat dilaksanakan secara lancar, kerana adalah dipercayai bahawa mengelak
adalah lebih baik daripada mengatasi.
IX
TABLE OF CONTENTS
CHAPTER
1
2
TITLE
PAGE
INTRODUCTION
1
1.1 Introduction
1
1.2 Problem Statement
2
1.3 Aim and Objectives
3
1.4 Scope of Research
3
1.5 Project Methodology
3
1.6 Significance of Findings
5
1.7 Summary
5
LITERATURE REVIEW
6
2.1 Introduction
6
2.2 Definition of Dispute
7
2.3 Causes of Disputes in the Industry
8
2.3.1 The Contract Conditions
10
2.3.2 The Design Deficiency
18
2.3.3 The Construction Process
28
2.3.4 The Consumer Reaction
29
2.3.5 Time
33
2.4 Causes of Disputes by Stakeholders
34
2.4.1 Causes of Disputes by Client
35
2.4.2 Causes of Disputes by Consultants
36
2.4.3 Causes of Disputes by Contractors
37
2.5 The Impact of Construction disputes on client
organization
39
X
2.6 Methods of Recovery of Disputes
40
2.6.1 Litigation
41
2.6.2 Arbitration
41
2.6.3 Mediation
42
2.6.4 Negotiation
42
2.7 Summary
43
3
RESEARCH METHODOLOGY
44
4
DATA ANALYSIS AND RESULTS
49
4.1 Introduction
49
4.2 Results and findings
60
4.3 Analysis and Discussions
66
4.3.1 Causes of disputes by clients
68
4.3.2 Causes of disputes by consultants
72
4.3.3 Causes of disputes by contractors
75
4.3.4 The impact on client’s organization
79
4.3.5 The most preferred method of resolving
disputes
4.5 Summary of findings
81
82
4.5.1 Identify the causes of major contributors
of construction disputes
83
4.5.2 Identify the impact of construction
disputes in client’s organization
85
4.5.3 The most preferred method of solving
disputes
5
CONCLUSIONS AND RECOMMENATIONS
85
86
5.1 Introduction
86
5.2 Conclusions
86
5.3 Recommendations
88
XI
REFERENCES
89
APPENDICES
92
XII
LIST OF FIGURES
Figure No.
Title
Page
2.1
Causes of disputes in contract condition
17
2.2
Causes of disputes through design deficiency
27
2.3
Causes of disputes by client
35
2.4
Causes of disputes by designers
36
2.5
Causes of disputes by contractors
37
Causes of construction disputes
38
2.7
Project dispute resolution satisfaction
40
4.1
Major causes of disputes caused by clients
71
4.2
Major causes of disputes caused by consultants
75
4.3
Major causes of disputes caused by contractors
77
4.4
Impact of disputes in client’s organization
80
4.5
Major Root causes of construction disputes
83
XIII
LIST OF TABLES
Table No.
Title
Page
Causes of construction disputes caused by client
4.1
i) Clients Point of View
54
4.2
ii) Consultants Point of View
55
4.3
iii) Contractors Point of View
56
4.4
iv) Overall respondents
57
Causes of construction disputes caused by Designers
4.5
i)
Clients Point of View
58
4.6
ii) Consultants Point of View
59
4.7
iii) Contractors Point of View
60
4.8
iv) Overall Respondents
61
Causes of construction disputes caused by contractors
4.9
i)
Clients Point of View
62
4.10
ii) Consultants Point of View
63
4.11
iii) Contractors Point of View
64
4.12
iv)
65
Overall Respondents
The Impact of Disputes in Clients Organization
4.13
i)
Clients Point of View
66
4.14
ii)
Consultants Point of View
67
4.15
iii)
Contractors Point of View
68
4.16
iv)
Overall Respondents
69
4.17
The Most Preferred Method of Resolving Disputes
70
1
Chapter 1
INTRODUCTION
1.1
Introduction to the Problem
Construction relationships in the construction industry all over the world have
become more increasingly strained as years goes on and on. Working relationships,
communications, and contractual commitments are often not carried in good faith. This
has led to most developed countries to search for better alternatives on how to manage
disputes in the construction industry. Though it has been seen that disputes in the
industry is like an un-incurable disease, means are done to fight the problem.
In the United Kingdom, for example the standard form of contract that is
internationally used to new engineering contracts has been subject to change; whereas,
in the United States of America the Disputes Review Boards ( DRB’s) which comprises
of three board members to manage disputes in construction sites was introduced. All this
exercises undertaken have proved to be successful.
Developing countries are still facing this problem and the research on this topic
will be on what to do either to improve or avoid and manage disputes in our local
construction industry. Alternative dispute resolution is therefore essential for the
industry in order to improve its performance.
2
1.2
Problem Statement
The construction industry has become very complicated such that political and
economic trends are increasing the economic pressure resulting in disputes. Complex
construction has brought about complex disputes in the industry. There are so many
different types of sources that may lead to disputes and this eventually becomes a burden
to the industry in terms of production
Great concern has been expressed in the recent years regarding the dramatic
conflicts and disputes in the construction industry in the whole world and this has
resulted in extensive high costs and time consuming. This is a result of the systems of
resolving disputes in the industry. An alternative resolution has been seen as a necessity
in the industry.
The alternative resolution of disputes should therefore address the causes of
disputes within a limited space of time so that the production capacity is not affected in
anyways. We have seen stakeholders blaming each other because of problems they come
across during the construction process, because of poorly done designs, claims, poor
administration and delays and these have been overlooked. There are questions rose on
what is it that is actually causing disputes in the industry? And why disputes have
become a nature of event in the industry?
Disputes and conflicts have gained frequent rise during construction of projects
and this needs an involvement of a neutral body to resolve disputes as early as possible.
3
1.3
Aim and Objectives
The aim of this study is to identify the best dispute resolution amongst the ones in
current use, and objectives of the study will be summarized as follows:
i
To identify the root causes of construction disputes
ii
To identify the impact of disputes in the industry
iii
To identify dispute resolution methods.
.
1.4
Scope of Research
This research has been carried out with a careful study on data collected mainly
on case studies and questionnaire survey exercise. The research was focused on the
private and government projects which are faced with the problem of construction
disputes.
1.5
Project Methodology
The methodology of the project consists of two phases as shown below (Refer to
Figure 1.1):
i)
Phase one
Gather information from journals, internet and book .Literature review on causes
of construction disputes, the impact in Client’s Organization and methods of dispute
recovery.
4
ii)
Phase two
The second phase of the study was conducting a survey and discussions with
relevant stakeholders, data collection from relevant stakeholders, data analysis and
discussions, conclusions and recommendations. The flow chart below illustrates the
steps of the study (research methodology):
Methodology
Literature review
Conducting a survey
Consultation with stakeholders
Data analysis & discussions
Conclusions and recommendations
Figure.1.1: Research Methodology
5
1.6
Significance of Findings
This study has identified the root causes of construction dispute caused by the
client, designers and contractors. It also covers the impact of construction disputes in a
client’s organization and methods of disputes recovery. These factors had been seen as
the major factors in affecting production in the industry, thus it is a necessity to manage
them or rather to avoid them for the better part of the performance of the industry.
1.7
Summary
This chapter covered the introduction to the problem of disputes in the
construction industry that has prompted to this study. Moreover it states the aim and
objectives, scope, methodology used and the significance of the findings. This project is
based on managing construction disputes that has been seen to be affecting the
industry’s performance. The results to be obtained from the study will help in improving
the production of the industry by means of implementing the decisions obtained from the
results of the study.
6
Chapter 2
MANAGING CONSTRUCTION DISPUTES
2.1
Introduction
So long as human nature is what it is there will always be disputes, and those
disputes what ever their characters are , they must be resolved if society is to exist in a
civilized way and this problems must be resolved as quickly, as cheaply and as
satisfactory as possible. Conflict resolution is probably the most important area for the
future of mankind and the continued existence of the world. Is it good enough to have it
served in inadequate manner?
“Conflict is seen to be a normal procedure in the construction industry and time
has come for professionals to come up with ideas on how to handle the situation to
normal. Disputes are almost inevitable in the fulfillment of construction contracts and
with those of significant magnitude or time span, the propensity for dispute is greater”.
(Hellard, 1987).
Research on the causes of conflicts and disputes in the construction industry has
therefore seen essential if the industries performance has to improve. Disputes and
conflicts are a burden in the industry though there are means of resolving them. The
methods are to be up graded if an alternative resolution is neglected. The construction
process involves different disciplines to work as a team in a short space of time. It also
involves large amounts of money that have to be shared amongst members of the team,
and that is where the problem is seen or starts.
7
According to Hellard (1987) types of disputes, conflicts that have been seen in
contractual relationship are summarized as follows;
i.
Time related disputes (delayed processes)
ii.
Financial matters (claims and payments)
iii.
Standards of workmanship (designs and manual works)
iv.
Relationships and people’s conflict in the industry
2.2
Definition of Dispute
The oxford dictionary defines dispute as a misunderstanding between two parties,
either contractual or non contractual but the fact is there is a misunderstanding between
the two it becomes a dispute. “A dispute is defined as a class or kind of conflict, which
manifests itself in distinct and justifiable issues. It involves disagreement over issues
capable of resolution by negotiation, mediation or third party adjudication.” (Brown et
al., 1993)
According to Bachner (1988) “a dispute will not exist until a claim is asserted by
one party which is disputed by the other party”. At most claims are seen to be one of the
causes and this needs an intervention of a neutral body to solve the problem if the other
party will dispute the said claim. 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.
According to Kumaraswarmy and Yogeswaran (1997), “a dispute can be said to
exist when a claim or assertion made is made by one party is rejected by the other party
and that rejection is not accepted.” They were referring this to the Institution of Civil
Engineer’s arbitration procedure. Any misunderstanding between two parties needs an
intervention of a neutral body who will not be biased in awarding the decision. If the
other party suspects that the award given is biased he then prefers for a better alternative.
8
The alternatives to solve disputes in the industry are becoming more and more expensive
in terms of time and financial wise.
“It is therefore wise to resolve the conflicts within the industry than involving
people who are not well vest about the industry” (Goyal, 1996). Involvement of lawyers
and judges has become costly for the participants of the industry, the disputes takes time
to be resolved and it is expensive. So a common understanding is essential for the
stakeholders in order to avoid disputes.
The Oxford dictionary defines Conflict as a dispute or two parties failing to reach
a common understanding. For a conflict to be resolved a third party is involved to make
the two to reach a common understanding.
2.3
Causes of Disputes in the Industry
“Undoubtedly many construction disputes have their origin in the seeds sown by
or in, the client’s error” (Hellard, 1987). Under normal circumstances disputes should
not occur if there is no common relationship between two parties, there must be a
common relationship between the two then a misunderstanding to be fulfilled and the
other parties fails to fulfill it then it becomes a dispute.
There are five sets of contractual relationships which are common in the
construction program. According to Hellard (1987) the relationships are as follows;
i.
The relationship of the owner to the designer
ii.
The relationship of the designer to another design specialist(s)
iii.
The relationship of the owner to the prime contractor
iv.
The relationship of the prime contractor to its subcontractors and
v.
The relationship of the prime contractor to suppliers
9
These five basic relationships have been studied over the years by interested
individuals as well as professional committees of varied membership from all corners of
the industry, along with private and public attorneys, all in potpourri of concerned
people. The result of these studies has been the publication and wide usage of standard
form contract documents which are published all over the world in different construction
industries.
“At most each and every government has its own contract form and more than
one contracting agency, and each agency, if of any size or self esteem, has its own
standard form”(Stipanowich, 1996). Irrespective of the origins, prejudices and ambitions
of their authors, all these standard contracts essentially set forth very similar rules and
have the same structural format. Most construction contracts are short in themselves, but
they incorporate by reference many documents which comprise the total agreement of
construction.
The study on construction disputes by Hellard (1987) has come up with the
following as major factors that causes disputes in the industry;
i.
ii.
iii.
The contract conditions
•
Lack of perfection in the contract documents
•
Failure to account the cost
•
The psychology of people in construction
The design deficiency
•
The underground or subsurface problem
•
Risks
•
Defective Plans
•
Methods or Means and specification performance
The construction process
10
iv.
v.
The consumer reaction
•
The public owner
•
Warranties
Time
2.3.1 The Contract Conditions
“The documents referenced as part of the contract typically include a front end
boiler plate which sets out the general conditions or rules which are to be followed and
the roles of those who will be governed by the rules” (Hellard 1987). The front end and
can and usually will include an invitation to bidders, which is a multi paged statement
describing very briefly the project and the salient terms and conditions a prospective
bidder must fulfill in order to file a responsive bid. The front end will include a bid form
for all bidders to use, thus standardizing the responses of all officers so that evaluations
can be rapidly and hopefully unerringly made. Strangely enough the bid form frequently
does not provide enough room for bidder to fulfill in the information required
Often the federalize for invitation for bid or request for proposal will require
certain information to be listed on the bid form, but no place for the information is
provided on the form. Careful review of the bid requirements and the bid form proposed
is the first step an owner and its designer should take to avoid construction disputes. Not
only the bid requires owner review, but the entire front end proposed by the designer
should be examined by the owner. It is not sufficient to assume that a front end is
acceptable because it is in common use on hundreds of million dollars in work. A survey
has been undertaken to review the problem by the authors and it was found that it
contains inherent contradictions, poor English, antiquated provisions, and all types of
ambiguity and confusion which can boggle the very best technical and legal minds.
Those who are purchasing the construction must read the boiler plate the designer
has prepared. Good business would indicate the contract condition be ready after enough
11
time has been given to review the boiler plate by designer and owner before the project
goes to bid. This will allow time and alteration. If there is uncertainty in the review’s
mind regarding what the rules or general conditions should best be, then a premiere
construction consultant, or the largest contractor, or the nearest associated general
contractors office should be asked to review the documents.
It is common practices that the standard contracts will be In favor of the owner
and the exact people who are doing the spade work are at disadvantage. It is therefore
essential to have a neutral body to review the contract documents before going on bid to
avoid any discrepancies that may occur due to poor documentation.
i)
The Lack of Perfection in the Contract Documents
“Owners, contractors, designers, and every one involved in construction readily
recognize and are quick to admit publicly the very obvious fact that a perfect set of
contract documents simply does not exist.” ( Hohns, 1979).
All drawings in the contract documents somewhere have mechanical drafting
errors or lack a needed dimension or detail. Many have errors which stem from the
human nature of the designer and draftsman. Not only are human errors, but changes
always occurring as projects undergo the design and construction process. Certain
selected equipment carefully specified because obsolete something better has come
along, but it is bigger or needs more power. There are changes in space usage to
accommodate revised owners needs, something unforeseen occurs, the documents and
work scopes must be adjusted. The more complex the project, the more ramifications a
change has. The shorter the period allowed for design, the more addenda’s that are
required, and the more the opportunity for errors.
12
No one man may know or remember every place a certain detail was shown. “The
larger the project, the more the people, the drawings, the thoughts, and the ideas
consequently, the larger the project the more errors there are” (Hall, 2002). Contract
documents are one major origin of disputes. Document errors become the fault of the
owner when they cost the contractor un-bid or unforeseeable dollars. Documents errors
become the fault of the designer when the judgment of its peers and the custom of the
industry the errors are gross and inexcusable. Document errors become liabilities when
someone who has a right to rely on the professional is severely hurt or damaged.
Punitive damages are staring to be considered as collectible against a professional when
the hearer of the facts finds that the professional’s refusal to come to grips with its duties
are offensive to any reasonable standards of behavior.
ii)
Failure to Count the Cost
“Dispute continually arises because someone failed to count the cost at the
beginning when the cost should have been defined” (Jessup et al., 1963). Few
contractors bring claim on projects which come in near or under the construction
budgets. Few owners seek liquidated damages when projects are done on time or close
to it. If designers are waterproof and the products the designer specified fulfill the sales
representative’s claims, disputes are few and far between. Contrary to the opinion of
most owners, few contractors are deliberately claim’s conscious. Most supervisory
projects personnel who work for the parties on the project have little real knowledge of
disputes or what is involved in litigation and arbitration, most of those involved in
getting a job done have solved complex problems on a daily basis of face to face
confrontation for such a long period of time that they come to believe they know it all.
Thus they prefer to argue among themselves and write what they believe are
clever letters to establish a record, and most distribute and resent the lawyers.
Contractors who have made money on a job usually do not invent claims or pursue
spurious claims. Most often, a contractor who is clearly entitled to valid contract
13
adjustment via a claim will ignore the situation if the job has come out well enough to
live with. Contractors like to get the job done and get over with. They fancy themselves
builders; claims take long to hold their interest.
According to Essex (1996) “Disputes arise when the job does not come out well,
and too often the reason for this is the failure initially to figure the cost accurately”. This
failure to count the cost initially is not confined to just the contractor. It applies to the
owner who set out unrealistically to build a factory, as well as the designer who sets out
the design it for less than it will really cost either in design or construction. In
construction, major dollars and work scopes are calculated and committed in short
periods of time. It is common that someone fails to count something, and end up with a
price that is too low. What is worse is that most of those in the industry simply do not
have the money to pay for their errors. The one with the best intentions can not pay for
his error. Ironically, too, it would seem to some observers that those with the money to
pay for their errors lack the degree of intention needed to dig deep enough to square the
account totally.
“In competitive contracting market, contractors work at extremely low mark up
levels.” (Glover and Elliot, 2005) Construction is perhaps the zenith in high volume, low
markup business. Usually general contractors bid in the public market with a fee of three
percent over its estimated cost. Subcontractors of significant figures importance on the
project run a five to eight percent fee. Less major subcontractors will mark up labor by
forty to sixty percent and carry material at cost. All sorts of pricing systems exist, but all
have one common trait: they are too low. This money must carry home office overhead
before net profit can be counted. The hardest part is that the dollar have to be collected
after all the delays and difficulties involved in retain age, back charges, punch lists, and
the like are resolved. Thus, to the contractor boxed in with retain-age and other cash
flow problems there is no room to absorb cost overruns.
14
“Construction pricing methods frequently are not to take into account the erection
process that will be ultimately required in sufficient detail” (Stipanwich, 1998). The
modern designer does not want to tell how a job should be done or prescribe or reveal
any sequential restrictions not strength related. Thus million of funds of work are priced
under severe time pressure using established unit price calculated from the estimators
experience and which to some extent many have been proven in ongoing or recent
projects. The failure of a contractor to understand and / or correctly bid or price the work
initially is a major reason for disputes. It is compounded by the ever present confident
overbearing optimism inherent in all contractors that they somehow are charismatic and
can overcome the dilemma of an obvious bid.
iii)
The Psychology of People in Construction
“It was noted earlier that construction is not a science, it is an art. Construction is
really people, and the successful contract administrator, or disputant to a contract
interpretation or unfortunate occurrence on a project, is well served to know a little
about people involved.” ( Hohns, 1979)
When traced down to real roots, a construction dispute has just two people
involved. They may be very visible to each other and all concerned, or they may not be
known to each other and insulted from it all by many layers of other people. The
successful disputant is often the one who knows the people in construction and how to
meet them and their psychological needs to their immediate benefit and the disputant’s
ultimate benefit. What are construction people? A question which provokes different
images to everyone. Tough, hard-driving, demanding, strong, ignorant, shrewd,
calculating, honest, dishonest, straight shooters are all adjectives applied at times to
individual members of the industry, and even though the adjectives are in some cases
antonyms, still the people they describe have some commonality. Construction people
have certain recognizable traits or makeup to their personalities. They are referred to
gregarious people. All want to belong to a crowd.
15
“The herding instinct is very strong in the industry’s people. All seek and need
that sense of acceptance or approval. They have a need to emulate the leaders or their
concept of the leaders of the profession. Words like belonging, imitation, loyalty,
recognition, superiority, status are descriptive of the human elements of gregariousness.
Try to make the other party feel as if he belongs to the pack. Find out the group the other
party feels important. Show him how resolution of the dispute will help him achieve or
strengthen his membership in the group” (Carmicheal, 2002).
The next trait to bear in mind is found when a person feels accepted into a group.
Almost always he will turn pugnacious. Now that he is in the group, he wants to fight for
its need and to seek recognition from his peer group. Words like aggressive, anger,
defiance to rules, competitive, curiosity, hate; hostility describes the pugnacity in people.
Give the other party something to fight for or with; perhaps a third person can be blamed
some of the dilemma. Use the trait of the other fellow’s pugnacity to advantage. More
important perhaps than pugnacity is that everyone has the problem of ego survival.
“It is one thing to loose money in a contract problem, but it is a lot to lose face.
All people have an idea of themselves which they feel must be defined” (McManamy,
1994). The construction industry is one in which the public and peer knowledge of what
everyone is doing is vast. There are few secretes in the industry. Everyone’s prices and
problems are known; words travel faster than air. Disputes can often be more easily
resolved when all the egos involved can survive. Not only are people typically quickly to
protect their self-image, they all want to extend the position they currently hold or claim
is theirs. Thus any massage couched in terms of few acquisition, promotion, saving
money, or being protected will be heard and every often receive action. Everyone wants
space, a better future, and the chance to increase the recognition of one’s self-worth.
Appeals to ambitions, goal realization, and increase of power help resolve disputes.
The clever disputant deals with its adversary with these ideas considered and brought
out. The survival and extension of one’s ego include as well the pleasing of a person.
Some people like to enjoy themselves, some like to suffer, others want argue, some like
16
detail, some the big pictures. The successful disputant looks for opportunities to help to
help the people on the other side find pleasure in the dispute proceedings.
According to Camicheal (2002) Construction disputes and confrontations arise
because the people involved have needs. From the contractor’s side the needs are usually
money or profit related. The designer has the ideas, his building or design which might
be his monument to himself, his reputation, his artistic temperament, his money, his
insurance premium, and similar needs. The owners have needs as well; political careers,
corporate careers, the need to have the space for a certain day. When something
unanticipated or not properly recognized interferes with the fulfillment process, goals
and security are jeopardized, communications become strained, and strains seem always
to be followed by demands, refusals, other more intense strains, hard, then harder
positions, and money losses. Unfortunately or perhaps otherwise, it is not in most people
to recognize an error, particularly their own, and say I’m sorry and seek to make
amends.
In construction most are unable to pay for their mistakes, it is simple too
expensive; and alas, those who can afford to pay for the mistakes generally remember
lots of others errors by the other party which even if already forgiven somehow must
now be reconsidered. Once confronted with a problem too expensive or complicated for
ready resolution, the claim or dispute process begins. At this juncture several more
typical human traits should be born in mind in addition to those already considered.
People are creatures who like order. People do not like chaos. Random thoughts,
unconnected conditions and ideas, jumping from this to that tends to confuse and
obfuscate the paths necessary for problem solving. Human beings react best to order.
Strangely, maybe sadly, people prefer well-ordered lies to chaotic truth.
Not only is order important, but personal habits are as well. There is a need in
everyone to follow their habits and traditions. Appeal to keeping the law, following
moral codes, being an early riser, or obeying the government are often rewarding.
People have a need to obey. If a construction problem exists chances are that sufficient
17
research and realism will find people as the root cause. In the quest of profit or career
improvement, construction people have been known to be greedy, never satisfied,
resentful, quick to cover themselves, quick to improve themselves, legalists one
moment, rationalizes next. They are often over their heads, lazy, not inclined to do good,
incompetent, yet protected by the needs of others and the system, indifferent,
discouraged, surprised, sick, or about to get sick. People are a prime cause of
construction disputes, and the only solution to these disputes as well. The rise of
society’s present attitudes that everyone has rights has led too much of the activity in
disputes. The vast amount of contention and society’s attitude towards one’s right must
be viewed from the more mature point that each day is one of the opportunities, not
guarantee, a foundational position which seems to be lacking in current thoughts. The
fish bone diagram (Fig. 2.1) below shows the causes of disputes through contract
documents.
Lack of perfection in the
contract documents
Failure to account the costs
Dispute
The psychology of people in construction
Figure 2.1: Fish bone diagram illustrating the root causes of disputes in contract
condition.
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2.3.2 The Design Deficiency
The design deficiency which leads to a major dispute is generally beyond an error
of omission. To be significant the design error usually must alter the means, methods,
environment, duration, or the conditions of the construction process. Any number of
factors can influence this. The most common place in which design errors are made are
in the foundations, in the construction of the frame and the enclosure, in the utilization
of spaces such as method and materials and the required end result are specified, in
project duration, and in connection with related performance by others on which the
project in question must at some point rely. Some of the problems are as follows:
i)
The Underground or Subsurface Problems
The cause of underground problem can be generally be traced to the handling,
display, and interpretation of subsurface investigations. The location, depth, number, and
types of borings or subsurface investigations are established by the engineer who needs
the information in the building’s foundation and its construction. Borings are typically
done by a drilling contractor usually hired directly by the owner, often on a competitive
basis using specifications prepared by the architect, the structural engineer, or a soils
engineer.
The owner obviously wants to get the most out of the borings and subsurface
investigations. These investigations are first used for the design of the foundation; then
they are typically offered to the contractor for its use in bidding and constructing the job,
and it is in this latter use that the disputes begin. It is well known in the industry that
variations in the earth’s composition constantly occur underground. It is also well known
that each bidding contractor cannot adequately investigate the site to define the soil
characteristics in the time period available for bidding. The owner thus has a problem. It
wants to put the risk of the excavation and methods of foundation construction on the
contractor. It also wants to buy the project for the best price. And so the dilemma, how
19
can the owner pass its soil boring and subsurface knowledge to the contractors to help
keep the bids down by sharing the best soil information available and still pass the risk
to the contractor if the work is more difficult or expensive than the borings indicate?
The route followed to move this risk over to the contractor is to write a clever
specification. The following are the random sample quotations from four different jobs
which are typical specification writer ideas of how to make soil characteristics available
in order to get the most accurate price and simultaneously put all the risk on the
contractor. Hohns (1997) makes an example of a case that took place in New England
building of a school with local engineers.
Sub surface conditions:
•
The owner has explored subsurface and the foundation conditions by having
authorized the making of borings on site.
•
The owner makes no representations regarding character or extent of soil, rock or
other subsurface conditions and / or utilities to be encountered during work.
Surface formations, including water levels, included in reports have been
interpreted from completed borings, correctness of which is not guaranteed.
•
The results of the subsurface investigation are available from the architect. The
bidder must make his own deductions of subsurface conditions which may affect
methods or cost of construction of the work. Each bidder, before submitting his
bid, must visit the site and examine all conditions that may affect his work, and
make his own deductions as to subsurface conditions. No claims for damages or
other compensation will be considered should the scope or progress of the work be
different from the ones anticipated by the contractor.
This sample is somewhat peculiar since the borings showed bedrock or boulders
and thus the specification almost has to lead to a claim for time and general condition
money in addition to the unit price for bedrock excavation.
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The data regarding the surface characteristics are first defined as information
only, not part of the contract documents, even though the information often is printed on
the contract drawings or bound into the specification book. It is here that the
specification writer goes astray, for those who write and enforce the specification (most
the owner or designer) forget or fail to perceive that while they may be the author and
the first interpreter of the specifications, the ultimate interpreter is a judge or panel with
possibly little acquaintance or sympathy with fancy word scheme for the risk avoidance.
There is no question that the ultimate interpreter in recent subsurface dispute has been
interpreting the soil disclaimer on the basis of reasonability.
The question asked to determine if the disclaimer is reasonable ultimately
becomes twofold. The first whether the bidder did anything special to investigate the
site, or did it rely only on the information printed or made available with the contract
documents. If the bidder dug a test pit, drilled a hole, investigated the subsurface site
characteristics in any way, or had previously worked on adjacent sites, and used this
special knowledge to price or plan its bid, then regardless of the degree of such separate
knowledge, it has become a special bidder. It can be argued that the bidder no longer has
the right to claim reliance on the owner’s information, indeed it has not so relied. The
bidder who makes any major independent analysis of the subsurface essentially picks up
the risk of the excavation.
The courts and review boards have generally been ruling in favor of the
contractor on the underground claims of added cost. These decisions have involved into
common law, where the consensus of the decisions leans strongly toward contractor
recovery. Consensus, however, does not guarantee a winner in a horse race any more
than it does in a construction dispute. The essential element in this type of claim may
well be reasonability and reliance but this does not negate the possibility of the superior
ability of either or both parties to persuade each other or the hearer of facts as to who is
really right. People often win arguments when they are wrong simply because they know
best to argue. Many times the skill of counsel will overcome the letter of the law.
21
ii)
Risks
The contractor should assess and display its risks to its advantage in any project it
prices. The present practice of the typical contractor is sadly deficient in risk defense in
comparison to the owners and designers. Usually the contractor makes an estimate on a
job consisting of three elements:
•
general conditions or field overhead
•
The labor and materials for work the contractor could or may want to do with its
own forces, and
•
The subcontractor work
Exposure to assuming responsibility for risk is largely found in the estimate
techniques and summaries which make up the element of general conditions. Sensible
estimator techniques in this area must be stressed since the estimate often records and
binds the thinking of the contractor forever. For example, the usual job specification will
set out that all work must be done between 8:00 A.M and 4:30 P.M on a five day wok
week. “Thus very obviously no overtime is contemplated, seen necessary, or wanted in
the mind of the writer of the contract” (Bachner, 1995). The contractor, however, almost
always include an item of overtime in its general conditions. Perhaps it is only the
overtime for the concrete finishers which could very well be within the perspective of
the writer of the contract, but unfortunately, almost without exception only the word
overtime is used in the estimate.
According to Goyal (1996) five years later in the construction dispute process the
original estimate is produced as part of discovery. The contractor pressing a delay claim
suddenly is confronted with the undeniable fact it recognized during the bidding stage
that the job could not be timely done without overtime. The contractor has admitted it
foresaw the potential of delay without overtime, and the urgency or ease of claim
collection can be jeopardized. How much? In one experience in Florida, a $920,000 loss
stuck because a contractor had listed large amount for overtime on a no overtime
22
specification and also showed an additional item called contingency of $10,000 on its
estimate. The judge said, “You knew it couldn’t be done, you bought the risk.”
According to Cheeks (1996) “in the present business world theory of risk
minimization, there is no place for a word like contingencies in estimate” All the parties
involved, bidder, owner, or engineer, must think out its program and not have
contingencies. Contingencies are unidentified but obviously recognized risk. Delay
could well be in the definition of contingency. It may never have been in the mind of the
person who wrote and qualified the contingency, but the persuadability of other five
years later may make it difficult to overcome the connotation of the word contingency,
particularly to the ultimate hearer of the facts. Modern contractors who are claim
conscious should forget the word contingency.
The owner and designer should be just as leery of the word contingency. The five
percent override on the base contract price by the typical owner in all its data processing
o other displays on the construction budget should not be characterized, discussed, or
written as a contingency. Let it be a reserve for upgrades in scope. Avoid the use of
words which could mean more than intended. The adversary could well sharp shoot a
god claim because of the words used in the planning process.
The place to put money for the contingency or overtime in non overtime
specifications is in a large fee. Fee is a common word to define markup on the estimate
of all field cost to cover the home office overhead and provide a profit. The fee or
markup commonly used at bid time is in the range of 2 to 4 percent for the major general
contractors. This means that a general contractor with one million dollars overhead must
do more than thirty million dollars per year at three percent to break even. Studies of a
number of contractors show that the home office costs usually run four and a half
percent of the volume, yet the bid markups of these contractors are often for less. There
may be no end of good reasons for the difference at bid time but five years later in a
major law suit for loss recovery those reasons are generally very hard to recall, and at
23
best the low fee originally charged becomes just another item of persuasion or argument
one does not need.
Those responsible for estimating, marketing, and buying have to be taught risk
analysis and protection. If one adds a contingency fee to the estimate, what does it
mean? Management must be aware of risk avoidance maneuvers and instruct its people
what to do. Insurance companies are criticized because they go to grate pains to teach
the professional designer or manufacture they have insured what to do or not to do.
Good business practice are certainly good business. This includes training and coaching.
The better one is trained and the more he practices, the better the player becomes and the
better the score.
The contractor, owner, or the engineer sophisticated enough to increase its fee
rather than particularize on paper controversial elements of cost is no more profit
minded or guilty of unfair business than if it had based its price on new methods of
construction cheaper than those in the in common use and then kept all the savings as
added profit for itself.
iii)
Defective Plans
“A major source of disputes in the design deficiencies is that categorized as
defective plans” (Hellard, 1997). What are defective plans? Most people involved with
plans have a working idea of the definition of this phrase, but in reality no standard
exists locally or nationally that precisely describes how to measure the plans for defects.
Indeed, everyone who has worked with plans know that no set of drawings is
complete or without error. Somewhere dimensions are missing, elevations or grades are
in error, a detail is missing, or a detail is shown but not needed. Not only are these types
of errors common, but all who work with plans know that drawings can always be
refined and upgraded. Plans can always be made better, they can be improved.
24
Thus all plans are to some extent defective and everyone involved in building
uses defective plans every day. The question in plan deficiency disputes is when the
plans become defective to the point at which undue costs are generated from their use.
The usual legal definition is that plans are to be prepared with the normal standard of
care found in the profession, but no precise standard exist. The designer has the
advantage of its subjective knowledge of the intent of the plans. In some cases pressures
from the client will be exerted for degree of performance in excess of the objective
intent of the plans. This, plus poorly drawn plans, poorly drawn details, poorly prepared
notes on drawings, and poor specifications may reach a point where in the opinion of
one’s peers, a level of acceptable performance has not been achieved. In the case of
errors of omission from a set of plans, the decision of adequacy on the part of the
professional is much easier to make than those which bear on methods or performance
levels to be met upon completion. If an engineer omits the exit lights totally, are the
plans defective? Does the owner have the right to rely on the boiler plate clauses
requiring the contractor to meet all codes to overcome the lack of exit lights? Probably
no, but then there is no fixed rule to answer these questions. The solution generally
comes from the people genuinely willing to confront such situations daily and work out
the answer. This nice sounding method, how ever, is a hope for method of solution at
best. It does not work all the time and is completed by the lack of practice measurement.
Big dispute can arise from defective plans. Experience has shown that major
dollars can be lost by one party to a contract because of a drafting error. Although this
type of error can be very expensive it may be common to the profession. In this case, for
the question is not the extent of damage but the degree of professionalism used or
lacking. Engineers and architects are cautioned not to judge themselves in disputes over
plans they have prepared which are called or seemingly are defective. The mature
designer will acknowledge the existence of an error and do its utmost to mitigate the
resultant costs of correction. The ultimate decision as to whether the designer is
responsible for the costs is for someone else to make. The designer must remember, in
spite of the noisy and menacing emotions of the moment that it is neither the contractor
25
nor the owner who is the judge of the designer. Their opinions may be temporarily
unpleasant but they are opinions, not judgments.
“The best reaction for a designer in an errant position is to move forward
immediately, calm sensible, and openly to measure and solve the problem and
simultaneously to create a record of interested, fair, genuine professionalism with
concern for all involved in any obvious overruns” (Paul et al.,2000). The sophisticated
designer will never admit responsibility for the error it is a long road from discovery of
an error in the design to providing it is the designer’s liability, and many people lose
their interest during the journey.
“When a dispute over plans arises, the disputant will be forced to establish by the
opinion of other plan producers and users that performance which constitutes the
standard of care” (Jessup et al., 1963). Those who seek to prove that opinion will often
find difficulty in locating peer professionals of sufficient stature willing to offer
testimony of a critical nature to a fellow professional. Then, too, the degree of
persuasive skills from member to member on the rosters of licensed professionals is
greatly variable. Highly credentialed peer critics may be unable to put forth persuasively
the arguments and conclusions or withstand cross examination regarding the deficiencies
needed to establish the errors and their maker guilty of gross.
The tactic to prove negligence or gross error is to seek legal precedence in similar
cases previously tried in the courts. The second best tactic is reliance on the opinion of
experienced professionals whose integrity has been long established and who are
recommended and well regarded on the local scene. The problem of omission is more
easily solved since it most often can be quantified in a straightforward manner. The
missing exit light costs so many dollars for the fixture, the conduit, the box, the wire,
and the panel breaker. Perhaps by being purchased as a change or modification, the
fixture will be more expensive than it would have been under the initial bid, but at worst
this increase or penalty is relatively minor.
26
The liability, however, can be far in excess of the omission o error. The ancillary
costs of a construction problem almost always exceed the direct costs. The owner and
the contractor have the right to expect the designer to produce a set of drawing plans
which will allow the project to be built. The law says the owner warrants to its
contractor that the plans, if followed, will produce the desire results and the project is
constructible. Thus if the error by the designer prevents the contractor from reaching its
ends, the question of ability and assessment of consequential costs exists.
iv)
Methods or Means and Specification Performance
The last category of deficient design is that the case in which the designer has
specified both method or means of construction and the result required and then refuses
to accept one of these two requirements. Example of this problem are legion but one that
occurs very often is when the designer specifies that a certain waterproof coating be
applied in two coats on some exterior surface under stringent conditions. The contractor
applies the specified coating exactly the way it should, careful inspection is made by the
designer as work proceeds, and then to the dismay of all the waterproof coating leaks
contrary to the specifications. Almost without exception, the work is rejected and the
contractor told to do it over. The means to accomplish the end result has been specified
and followed but the end result does not meet the specification.
“The problem, while very simple and obvious in the foregoing illustration, can
quickly get very complicated and significant when detailed structural or mechanical
sequences are set forth” (Mix, 1994). They are carefully followed, inspected before,
during and after construction, all approved, and, lo and behold, big cracks appear in the
walls and floors or the fancy heating and cooling system does not heat or cool. The
principle is still simple: If the designer tells the contractor how to do something, the
designer cannot impose a result beyond the product of the specified means This does not
mean that the designer will not try nor does it mean that the contractor can view its
responsibility for workmanship lightly.
27
Very often, the architect or engineer in its roll as interpreter of the contract will
find itself in the position of imposing the consequence on a contractor of an error for
which the designer is as at fault and will ultimately be found responsible. The imposition
of the consequence of the error on the contractor can mean penalties beyond all fair play
such as financial failure, loss of personal health, even suicide.
“Can the contractor recover or pursue punitive damages such a capricious and
arbitrarily act by a designer? Again, there is no hard rule, but it would appear that the
common law evolvement process is now setting the stage for such punitive” (Horns,
1979). Some recent liberal stats who set the initial trends in law at lower levels have
found that failure to act in while fully aware of the consequences even in a contract
relationship is really a tort action and punitive damages are assessable. This is still to a
great or perhaps total extent curbstone law wishful thinking, but all who use the courts
know that today’s jurists are zealous to enforce the tenet that people who pretend to
bargain and act toward each other in contract situations in good faith are acting with
fraud, duress, and skullduggery should be brought to task. Figure 2.2 shows the causes
of disputes through design deficiency:
Means & specification performance
Risks
Dispute
Underground or subsurface problems
Defective plans
Figure 2.2 Fish bone diagram shows root causes of disputes through design deficiency.
28
2.3.3 The Construction Process
The next spawning ground for construction disputes is found in the consequences
of the construction process. “Many times it can be difficult to differentiate between a
design error and the consequence of the process.”(Hohns, 1979)
Some items that give rise to dispute in the construction process are failure to plan
and schedule adequately, failure to follow a plan and schedule, disagreement over what
material is really specified, disputes over what is really an equal, failure to supply
adequate manpower, responsibility for lack of adequate subcontractor manpower,
equipment changes that cause delay. Changes or modifications of scope that increase
consequential costs beyond specified markup, failure by the owner to fulfill its
responsibilities on time, failure by the engineer to approve contractor submittals on time,
overpayment for work in place, underpayment for work in place, failure to provide
temporary heat, hosting, or elevators, lack of performance ability in one of the
subcontractors, etc. certainly the list is almost endless, but by trade practice and custom
essentially the items thereon relate to someone’s failure to do that which was required by
its contract, thus changing the basis expected and / or implied to be available to the
extent that the means, environment, conditions, or duration of a project are significantly
affected for any member of the process who feels sufficiently aggrieved to file a claim.
The construction process dispute is recently being pursued under both contract
and tort concepts of law. If a designer who does not have a contract with the contractor
does not do its work in the time and manner set forth in the owner-contractor contract or
in the time and manner on which the contractor has a right to rely, i.e., duties well
established by custom and the standard of care, the designer incurs a very real risk of
being sued by the contractor in a tort action. Tort actions bring the added threat of
punitive damages.
This exposure to the design professional has never really been
pursued until the last few years.
29
“The construction process dispute and almost all disputes involving large amounts
of money are time related” (Hellard, 1997). Much focus is put on contract time; the
contract documents usually set forth a definite number of calendar days or fixed final
date for completion. There is at times more than one date in the documents when jobs
are to be built in phases or specific milestone portions of completion are necessary. The
second focus on time-related consequences is the juggling act an owner goes through
when, for example, it develops a $ 100 million program which for the reasons of
management is spread over say ten or more separate contracts, all or many of which
depend on each other for start, mid job milestones, and interrelated finishes. In this type
of situation, the pace of everyone involved can and usually does break down and causes
the need for adjustments for delay damages.
2.3.4 The Consumer Reaction
The consumer can be any other of variety of people. It can be the owner, private
or public, or a corporate body. “The corporate owner in a dispute situation always boils
down somewhere to one person who at times is hard to find.” (Hellard, 1987).
The word management is the protective umbrella to shield so individuals. The
consumer can be a tenant or it can be a purchaser of the building such as a condominium
buyer. It can be a user who pays money to come into the building or comes to spend
money or go to work. The aggrieved consumer can have no relationship with the
contractor, designer, or the owner and still have a reaction to their endeavor
Good building can sell images. Bad buildings can provide much press and
publicity. In some cases there is no such thing as bad free advertising here and there a
problem building or structure can be a blessing.
30
i)
The Public Owner
The typical public owner, such as the a school board, division of hospitals, or
municipal corporation, is not particularly set up or organized to display or assert its
reaction to its new building or alteration project if it does not do what it was supposed to
do. The adage “out of sight, out of mind” applies for most of the problems experienced
as this type of owner takes over and uses a newly constructed facility. The maintenance
and occupancy of the building are generally the responsibility of a set of other people
other than those who were responsible for its design, creation, and construction.
“No one knows who did not do what, or had agreed to do something else, or what
ever. It is only infrequently that the designer passes out manuals which say that the
building was designed to support such and such or so many kilowatts of electricity were
to be consumed, and so on” (Ruskin, 1982). Instead the use of the building is something
that is learned by chance by the people who take over and determine for themselves how
they think the building should best be used. It is the rare building which is put into use as
programmed by the engineer.
It has been until recently that any emphasis has been placed on getting the
contractor or the designer to pay for its mistakes. The prime move towards this idea has
been the staggering cost to repair, replace, or alter a system that does not function
acceptably let alone as it purported to. The complexity of today’s installations as far as
keeping indoor atmosphere cool, dry, quiet, etc., or treating one’s sewage makes it
necessary for an owner who has not been well served by its contractor or designer to
pursue one or both for relief.
Until some years ago there was a tendency among the design profession to be
unwilling to find fault with other members of its profession. More recently, responsible
professionals in design are now willing and forced to criticize those among them who
have not done the type of design work expected. The same has occurred with
contractors. As demands have been made upon the construction industry to produce
31
more and more in a shorter period of time, workmanship has decreased. The tendency of
the employees to favor the union hall to his employer has led to a talk of skill, interest,
durability, and workmanship in many, many cases. The owner now is unwilling and
unable to absorb the results for the design and poor workmanship.
ii)
Warranties
The contract will typically spell out the obligation of the contractors regarding
guarantee. The standard form of contract JKR 203 stipulates as follows:
The contractor warrants to the owner and the SO that all materials and equipment
furnished under this contract will be known unless otherwise specified, and that all work
will be good quality, free from faults and defects and in conforming to the contract
documents. All work not conforming to these requirements, including substitutions not
properly approved and authorized, may be considered defective. If required by the SO,
the contractor shall furnish satisfactory evidence as to the kind and quality of materials
and equipment.
If within one year after the date of substantial completion or within such longer
period of time as many be prescribed by law or by the terms of any applicable special
guarantee required by the contract documents, any of the work is found to be defective
or not in accordance with the contract documents, the contractor shall correct it promptly
after receipt of a written notice the SO to do so unless the SO has already previously
given the contractor as written acceptance of such condition. The owner shall give such
notice promptly after discovery of the condition. The courts hold that the warranty
means what it says and will enforce the contractor to meet the requirements.
“Many problems in warranty come about when the contractor is unable to
duplicate the agreement it made with the owner, its suppliers, and its subcontractors the
typical national manufacturer of major equipment will offer a warranty for one year
32
from stat up, a period that does not coincide with the agreement between owner and
contractor” (Battelle, 1995).
Obviously, the owner feels the contractor knew this and should have priced its bid
to offer the warranty stated regardless of startup caveats from the manufacturer, but most
contractors do not do so and instead a squabble over the warranty periods occurs. The
owner has no reason to give in on warranties and if does so, it has been outplayed.
Owners, who accept buildings with problems that are known at that time of acceptance,
accept the problems as well, unless the problem is noted as an exception. These
problems are called patent defects. An unknown defect is called a latent defect and is
sometimes wrong that no one could observe or properly realize.
In the case of discovery of a latent defect, the owner must give the contractor the
opportunity to repair or correct the defect before it can go off and relief in some
preferable way. Aggressive contractors do well to press continually for substantial
completion certificate, to argue partial occupancy, and constantly fill the atmosphere
with a stated willingness to make good all defects in workmanship. The aggressive
contractor will simultaneously be careful to vigorously argue verbally that it is
responsible for only those defects arising from failure to follow plans and specifications,
and request proof of departure each time a defect is raised for correction. Aggressive
owners will do well to hold substantial sums of the contractor’s money. Reduced retain
age at occupancy generally means increased grief after occupancy.
“The high degree of sophistication needed to understand how to run one of today’s
projects puts another burden on the owner. Typically owners do not maintain the new
building and its components as required by the operator’s manual” (Bachner, 1995).
Often, too, no one on the owner’s staff understands the theory of the boiler plant, fan
room, or controls. An owner with but a small amount of missed but required
maintenance may have needlessly given the aggressive contractor enough muddy water
to make the owner attempt to have the contractor perform the correction process of
33
equipment defects so frustrating and lacking in joy that the owner inevitably decides to
face the problem itself, and all parties go their separate way.
The implied warranty or right of reliance on buildings or parts thereof to do
certain things has received a great deal of press and publicity. Certainly the owner or
user has a right to pursue recovery of damages if the project does not deliver that which
all have a right, stated or not, to expect. The product liability litigation again seems to
follow the doctrine of reasonability. The subject of the product’s liability litigation is
outside the scope of this text
2.3.5 Time
Those involved in a construction problem quickly learn that it is not the hard (or
the nuts and bolts) dollars which are important; rather it is in the time related costs that
the huge damages arise to all concerned. The owner with the late facility has all sorts of
extra costs or losses with which to contend in a delay posture; the contractor suffer the
added costs of stretch-out, escalation of wages and other costs, and loss from their
liability to focus management on new spheres of work.
According to Hall (2000) “time is the key and the use of time is planned by
scheduling”. Every construction job requires a schedule. Some require simple bar chart
schedule, others require more detailed studies, and some require complex computer
produced critical path method or construction manager control system programs. The
latter techniques are very popular, and becoming more so to the extent that sophisticated
scheduling techniques required for certain types of work. The bar chart is the usual
standard when the CPM schedule is not used.
Scheduling or proper planning by the contractor on how to handle his job in time
will need planning programs. This shall help the contractor to manage his project and
finish and complete his jobs on agreed time. This will avoid any dispute that may occur
due to delay because of poor planning, poor scheduling by the contractor. Serious
34
disputes have occurred due to delayed works. At most the contractors, they overlook this
part of the project stage and they just take it simple and it is the one that causes disputes
most. Time needs to be monitored to avoid any conflict between the owner and the
client.
2.4
Causes of Disputes by Stakeholders
Fenn et al., (1997) states that “as a consequence of building projects in general
being complicated, unique ventures erected largely in the open, on ground the condition
of which is never fully predictable and in weather conditions that are even less so, it is
common for disputes to arise during the course of building operations”. There are many
reasons why disputes occur, but in the main they are caused by the failure of one or
more members of the building team:
•
Failure to do their work correctly, efficiently and in a timely manner
•
Failure to express themselves clearly, or
•
Failure to understand the implication of instructions.
A study carried out by Fenn (1997), Hall (2000) and Carmicheal (2002) have
showed and identified the courses of construction disputes that contributed by the
various party in construction projects.
In this study the authors have decided to classify the events of construction
disputes into three categories which are clients, designers and contractors. The causes of
construction disputes listed below have been identified by range of party representatives
and professionals working in the construction industry. The authors have identified the
causes of construction disputes that are caused by client, designer and contractor as
follows:
35
2.4.1 Causes of Construction Dispute by Clients
Fenn (1997) identified the following factors as causes of construction disputes
caused by clients:
•
Failure to respond in timely manner
•
Poor communications amongst members of the team
•
Inadequate tracing mechanisms for request of information
•
Deficient management, supervision and coordination efforts on the part of the
project
•
Lowest price mentality in engagement of contractors and designers.
•
The absence of team spirit among the participants.
•
Reluctant to check for constructability, clarity and completeness.
•
Failure to appoint a project manager
•
Discrepancies / ambiguities in contract documents.
The fish bone diagram below Fig.2.3 shows causes of disputes caused by clients:
Poor communication
Failure to respond in time
Inadequate tracing mechanism for
request of information
Deficient management,
supervision and
Dispute
Lowest price mentality in
engagement of contractors and
Discrepancies in
contract documents
Reluctance to check for contract
ability, clarity and completeness
Failure to appoint project
manager
Fig. 2.3 Fish bone diagram illustrating causes of disputes by client
36
2.4.2
Causes of Construction Dispute by the Consultants
Hall (2000) identified causes of construction disputes caused by consultants as
they are listed below:
•
Failure to understand its responsibilities under the design team contract
•
Over design and underestimating the costs involved
•
Late information delivery and cumbersome approach to request for information’s
•
Design and specification oversights and errors or omissions resulting from
uncoordinated civil, structural, architectural, mechanical and electrical designs.
•
Incompleteness of drawing and specifications
The fish bone diagram below Fig. 2.4 shows causes of disputes caused by consultants
Failure to understand its responsibilities under the
design team contract
Over design and understanding the costs
involved
To request for information late
information delivery and
cumbersome approach
Dispute
Incompleteness of drawings and specification
Design and specification oversight and errors
or omissions from specialists
Figure 2.4: Fish bone diagram illustrating causes of disputes by consultants.
37
2.4.2
Causes of Construction Disputes by Contractors
Carmicheal (2002) identified causes of construction disputes caused by
contractors as follows:
•
Inadequate contractors management, supervision and coordination
•
Delay/ suspension of works
•
Failure to plan and execute the changes of works
•
Failure to understand and correctly bid or price the works
•
Lack of understanding and agreement in contract procurement
•
Reluctance to seek clarification
•
Inadequate CPM scheduling and update requirements
Below is fish bone diagram Fig. 2.5 showing the root causes of construction disputes
caused by contactors.
Inadequate contractor’s management,
supervision and coordination
Failure to plan and execute the
changes of works
Delay / suspension of works
Reluctance to seek
clarification
Dispute
Inadequate CPM scheduling and
update requirement
Failure to understand and correctly bid
or price the works
Lack of understanding and agreement in
contract procurement
Fig. 2.5 Fish bone diagram illustrating causes of disputes by contractors
Design Deficiency
Defective plans
Construction Process
Contract Conditions
Lack of perfection in the
contract documents
The underground or subsurface
problems
Failure to count the
cost
Risks
The psychology of people
in construction
Root causes of
disputes
No damage for delay
contract clause
Poor communication
Time related
problems
Reluctance to seek for
clarification
Over design and
underestimating costs
Incompleteness of
drawings
Failure to respond in timely
manner
Changes
Dispute
Discrepancies in
contract documents
Delayed works
Caused by Consultants
Reluctance to check
for constructability
Caused by Clients
Poor scheduling
Caused by Contractors
Figure 2.6: fish bone diagram showing root causes of construction disputes
39
2.5
The Impact of Construction Disputes on Client’s Organizations
Problems of construction disputes impacts on all stakeholders which may lead to
an inequitable mode of project delivery such as reduce the margins, increased costs and
even reduced the quality and levels of service. Most disputes are of a minor nature and
are settled quickly, fairly and amicably by the building team. From time to time,
however, more serious the issues come into dispute.
When this happens, the building team should make mean to reach a fair settlement
by negotiation. If this fails, it becomes necessary to use one or more of the dispute
resolution mechanisms available and these are mediation, arbitration and litigation.
When the above mentioned methods of dispute recovery fails, the out come of the results
will be only winning or losing of one of the parties. Hall (2000) observed that
consequences of the construction disputes will not benefit the stakeholders in the
construction project. Therefore the impact of construction disputes into client
organizations can be summarized as follows:
•
Additional expense in managerial and administration
•
Possibility of litigation cases
•
Loss of company reputation
•
Loss of profitability and perhaps business viability
•
Time delays and costs overruns
•
Extended and / or more complex award process
•
Loss of professional reputation
•
Diminution of respect between parties and deterioration of relationship and break
down in cooperation
•
High tender prices
•
Rework and relocation costs for men, equipment and materials
401
2.6
Methods of Recovery of disputes
“Some conflicts and disputes are not avoidable, proper management of conflict
will ease the impact it has on the construction process, but resolution must follow
quickly. Dispute can be resolved by either using informal such as negotiation and
alternative resolution methods (ADR) or formal resolution methods such as mediation,
arbitration and litigation.” (Whitfield, 1994).
Cheung, et al., (2000) in their reviewed paper on project dispute resolution
satisfaction classification through neural network. They have classified the dispute
resolutions into five different stages. The diagram bellow illustrates the stages
Litigation
Line of increasing cost and
Antagonism
Binding resolution
e.g. Arbitration
Non-binding Resolution
e.g. Mediation, Mini-trial and Adjudication
Standing Neutral e.g. Dispute resolution
Adviser, Dispute Review board
Negotiation
Favorable DRS
Adverse DRS
Figure 2.7: Definition of Project dispute resolution satisfaction
412
2.6.1 Litigation
On any given construction project, disputes among the various parties are virtually
guaranteed. In large measures, this is because the construction industry is not
particularly well integrated and the opportunities for conflict between the many
participants at all stages of the design and construction development are numerous, even
on relatively small projects.
Litigating these disputes before a judge and jury is expensive. Legal costs are not
always predictable and the parties do not always anticipate or quantify the time and costs
directly attributable to tying up key staff members in discovery, hearings, depositions,
preparing or answering interrogatories, meeting with lawyers, testifying, and
reconstruction of project files.
Litigation also risks irreparably damaging the relationship between the parties and
causes them to substantially relinquish control over the outcome of the dispute.
Alternative forms of dispute resolution (ADR), intended to reduce or eliminate some of
the undesirable consequences of litigation, have come into more practice.
According to Essex (1996), in response to the increasing levels of litigation
experienced in the early 1990s, the U.S. construction industry looked to the alternative
means of resolving disputes. Grouped under the term Alternative Dispute Resolution
(ADR) methods, they include arbitration, negotiation, mediation, mi-trials, and rent-ajudge and dispute review boards
2.6.2 Arbitration
Organizations such as the American Arbitration Association in the U.S. have
provided means for binding and non-binding forums to hear and resolve grievances.
Such organizations provide listening of individuals qualified in selected areas of
423
expertise, from which the parties may choose one or more arbiters for a specified
dispute.
A disadvantage of this approach is that arbitration, like litigation, is usually
started too late, takes too long to reach resolution, and costs too much. It does little to
dispel the adversarial relationship which develops before the process can be
implemented. “The resolution of a specific dispute withstanding, the outcome may
further erode the relationship between the parties throughout the remainder of the
project” (Bancher, 1988)
2.6.3 Mediation
Mediation is a widely used technique wherein the parties continue their
negotiation with the assistance of a mediator. The mediator serves at the request of the
disputing parties and facilitates, but does not dictate the negotiation. The process may
involve joint meetings as well as sequences of separate meetings with each party.
According to Bachner (1988) “The mediator undertakes to clarify each party’s
concept of each of the facts given, priorities and positions; loosen rigid stances, explores
alternative solutions, and seeks trade-offs”. The mediator is an agent of reality, never an
advocate for either side. The outcome is either a resolution of the dispute or step towards
other recourses.
2.6.4 Negotiation
“Negotiation is a voluntarily pre-hearing or mandatory pretrial” (Smith et al.,
1996). It is generally an extension of the parties’ earlier negotiations, but is conducted
by their newly appointed representatives or attorneys. If unsuccessful, such negotiations
may also continue as a final attempt pretrial under the direction of a trial judge.
However, any settlement or resolution is only achieved by agreement of the parties.
434
Although this method can avert a trial, its success depends on the attitudes and expertise
of the representatives. If these individuals happen to be opposing attorneys, they must be
dedicated to the success of their mission. Otherwise, they might as well be in court.
2.7
Summary
This chapter covered the root causes of construction disputes from their sources.
Performance at its best is a result of collaborative team work, if there is none it becomes
very difficult to achieve the intended goal. The misunderstanding of the contract
document can cause serious dispute among members of the team, thus it is wise to
understand the contracts contained in the document.
Researchers have observed that designs deficiency has caused problems in the
industry, this is because most of the drawings are deficient. Moreover they have
observed that construction disputes have a serious effect in the client’s organization, it is
therefore necessary to manage disputes to improve production in the industry without
delays and cost overruns.
5
Chapter 3
RESEARCH METHODOLOGY
3.1
Introduction
The primary research objective is to identify the root causes of construction
disputes. The study of this research was contacted in two phases, the first phase being
collecting or gathering information and the second phase was collecting data from
relevant parties involved in the industry. The research methodology goes as follows:
3.2
Phase One
Information related to the problem were gathered from reliable sources which in
this case were from the internet; this were most on recent journals published on maters
related to causes of construction disputes, means of avoiding them and alternative
disputes resolutions. Such information was of help in resuscitating the problem at hand.
Books related to the problem faced were used as well. Such were to give the basic
background on construction disputes and were to enhance the researcher to be focused
on the problem statement. Such information was available from the university library.
Past information is believed to be of good help for researchers in order to come up with
constructive solutions.
446
3.3
Phase Two
Having gathered the information from sources, data was then collected from the
parties believed to be part and parcel of the problem encountered. Questionnaires were
distributed within the city of Johor Bahru. The questionnaire were focused more on
causes of disputes caused by each of the following parties; clients, consultants and
contractors. These were to enhance the study in coming up with the best results that
would benefit the industry in Malaysia and other countries faced with similar problem.
The questions had to be answered in such a way that the respondent were to
choose the significance on which the cause were occurring. For example, the following
is a set of questions related to causes of construction disputes caused by client.
Causes of Construction Disputes caused by Client
Indicator,
1
2
3
4
5
- Very rare
- Rare
- Average
- Often
- Very often
1
Failure to respond in timely manner.
1 2 3 4 5
2
Inadequate tracing mechanisms for RFIs.
1 2 3 4 5
3
Reluctant to check for constructability,
clarity and completeness.
1 2 3 4 5
4
Discrepancies or ambiguities in contract documents.
1 2 3 4 5
5
Poor communication among members of the team.
1 2 3 4 5
6
Failure to appoint an overall project manager.
1 2 3 4 5
7
Lowest price mentality in engagement of contractors
And designers
1 2 3 4 5
The absence of team spirit among members of the team.
1 2 3 4 5
8
457
The same was done with causes of construction disputes caused by designers and
contractors. This shall enable the researcher to observe the major causes of construction
disputes, by so doing recommendations were initiated to capacitate the results obtained.
The second part of the questionnaire was focusing on the end results of the
disputes in the client’s organization. This question would enhance the researcher in
identifying the side effects of construction disputes in the industry at large.
The last question from the questionnaire was on the most preferred method of
resolving disputes among the three that are commonly used in Malaysia; mediation,
arbitration and litigation. This again would help in using one method in resolving
construction disputes incase the dispute has not been managed or properly handled such
that it would need the intervention of the third party.
Disputes have been observed as a menace in the industry such that it has affected
the performance of the industry in the past years, this study is aimed at avoiding such
characters to normalize the situation and even improve it for the better part of it. The
flow chard diagram (figure. 1.1) illustrating the process of the research methodology to
be used to carry out the study.
3.4
Analysis of Questionnaire
For the purpose of analysis of data collected through the questionnaire, the
research used frequency analysis and average index. The average index is calculated as
follows (Al-Hammad, 1996; Abd Majid & MacCaffer, 1997 and Abd Majid 1997).
Average Index =
∑a x
∑n
i
i
46 8
Where,
a = constant expressing the weight given to i
x = variables expressing the frequency of response for i = 1, 2,3,4,5
In order to determine the significance of the factors in this subject matter the
classification of rating the scale was as follows:
1.0 < Average Index < 1.5
Very rare
1.5 < Average Index < 2.5
Rare
2.5 < Average Index < 3.5
Average
3.5 < Average Index < 4.5
Often
4.5 < Average Index < 5.0
Very
The grading of the results was to signify the contribution factor of the question
into the problem, very rare to rare were reckoned as non contributing factors to the
problem, average were factors identified as averagely contributing to the problem and,
often and very often were identified as major contributors to the problem and these were
the very same factors to focus on in how to avoid them or rather how to solve them in
order to normalize the situation in the industry.
3.5
Conclusions and Recommendations
Based on the results obtained, conclusions and recommendations were developed.
All the factors listed can cause serious dispute to the extent that the project can come to
a halt but there are those factors seen to be frequently occurring, so they are the factors
identified as major contributors and they have suffered the performance of the industry
at large. Based on the results, conclusions and recommendations were later suggested on
these factors on how to handle them for the better performance of the industry in future.
489
The next chapter has detailed information on the above mentioned statement.
10
Chapter 4
DATA ANALYSIS AND RESULTS
4.1
Introduction
In this chapter, data collected is analyzed and interpreted as presented to achieve
the objectives of the study. Conclusion has been derived on the major contributor that
causes the construction dispute as the most appropriate measures were made to
overcome the dispute occurrences. The data obtained from the questionnaire survey
based on the response from client, consultants and contractors to the allocated questions
on the construction dispute related issues were analyzed accordingly in the forthcoming
sections:
•
Results and findings
•
Analyzed data collected from client
•
Analyzed data collected from consultants
•
Analyzed data collected from contractors
There were forty questionnaires distributed and only thirty two responded, and
these questionnaires were grouped accordingly, clients, consultants and contractors. Out
of the thirty two respondents thirteen were contractors, eleven were consultants and
eight were clients.
50
11
4.2
Analysis and Results
4.2.1 Causes of Construction Disputes by Client
i)
Client Point of View
Scores were graded as mentioned earlier on that is (1) very rare (2) rare (3)
average (4) often and (5) very often. The mean index was used to grade the weight of the
question on how much it affected the industry or rather how much it had contributed to
the problem.
Table 4.1: Client’s Point of View
Scores
Questions
1
2
3
4
5
6
7
8
9
Failure to respond in timely
manner
Poor communications amongst
Members of the team
Inadequate tracing mechanisms
For the request of information
Deficient management,
supervision and coordination
efforts on the part of the project
Lowest price mentality in
engagement of contractor’s
designers.
Reluctance to check for
constructability, clarity and
completeness
Failure to appoint a project
manager
Discrepancies/ ambiguities in
contract documents
The absence of team spirit
among the participants
Mean
Index
1
2
3
4
5
0
0
2
4
2
4.00
0
0
1
3
4
4.40
0
0
3
4
1
3.80
0
0
2
3
3
4.10
0
1
3
4
0
3.00
0
0
3
3
2
3.90
1
0
2
3
3
4.30
0
0
3
3
2
3.90
0
0
4
3
1
3.600
51 12
ii)
Consultant Point of View
The respondence was eleven and all of them attempted the questions in the
questionnaire, the results are as illustrated below in Table 4.2.
Table 4.2: Consultants point of view
Scores
Questions
1
2
3
4
5
6
7
8
9
Failure to respond in timely
manner
Poor communications amongst
Members of the team
Inadequate tracing mechanisms
For the request of information
Deficient management,
supervision and coordination
efforts on the part of the project
Lowest price mentality in
engagement of contractor’s
Designers.
Reluctance to check for
constructability, clarity and
completeness
Failure to appoint a project
manager
Discrepancies/ ambiguities in
contract documents
The absence of team spirit
among the participants
Mean
Index
1
2
3
4
5
0
0
5
4
2
3.70
0
0
6
3
2
3.60
0
3
3
4
1
3.30
0
2
4
3
2
3.50
0
2
4
5
0
3.30
0
3
3
3
2
3.40
1
2
2
3
3
3.50
0
4
3
3
1
3.10
0
3
3
3
2
3.40
52
13
iii)
Contractors Point of View
The respondence to this question was thirteen and they answered all the questions,
the results are as shown below in Table 4.3.
Table 4.3: Contractor’s pint of view
Scores
Questions
1
2
3
4
5
6
7
8
9
Failure to respond in timely
manner
Poor communications amongst
Members of the team
Inadequate tracing mechanisms
For the request of information
Deficient management,
supervision and coordination
efforts on the part of the project
Lowest price mentality in
engagement of contractor’s
designers.
Reluctance to check for
constructability, clarity and
completeness
Failure to appoint a project
manager
Discrepancies/ ambiguities in
contract documents
The absence of team spirit
among the participants
Mean
Index
1
2
3
4
5
0
4
3
4
2
3.30
0
3
3
3
4
4.30
0
3
5
4
1
3.20
0
3
4
3
3
3.50
0
2
4
4
3
3.60
0
3
5
3
2
3.30
1
4
2
3
3
3.20
0
3
3
5
2
3.50
0
4
4
4
1
3.20
53
14
iv)
Overall Respondents
The significance of each question shall be graded in a sequence form to reveal the
impact it has on the problem, this will show the weight of the factor and the major
factors arranged in their order of significance. See overall respondents in Table 4.4.
Table 4.4: Overall Response
Question
1 Failure to appoint a project
manager
2 Poor communication
amongst members of the
team
3 Deficient management,
supervision and coordination
efforts on the part of the
project
4 Failure to appoint a project
manager
5 Reluctance to check for
constructability, clarity and
completeness
6 Discrepancies/ ambiguities in
contract documents
7 The absence of team spirit
among the participants
8 Inadequate tracing
mechanisms for the request
of information
9 Lowest price mentality in
engagement of contractor’s
design
Scores
Mean
index
1
2
3
4
5
0
3
10
9
10
3.81
0
4
10
12
6
3.63
0
5
10
9
8
3.63
2
6
6
9
9
3.53
0
6
11
13
3
3.50
0
6
11
9
6
3.47
0
6
6
9
9
3.44
0
7
9
11
5
3.44
0
7
11
10
4
3.34
54
15
4.2.2 Causes of Construction Disputes Caused by Consultants
i)
Clients Point of View
The response to this question was 100% to all parties involved. The results
obtained are shown on the following table according to grouped disciplines as done on
the previous section. Causes of construction disputes caused by consultants, below
Table 4.5 shows the clients point of view.
Table 4.5: Client’s point of view
Scores
Questions
1 Failure to understand its
responsibilities under design
team contract
2 Over design and underestimating
the costs involved
3 Late information delivery and
cumbersome approach to request
for information
4 Design and specification
oversights and errors or
omissions resulting from
uncoordinated civil, architectural,
mechanical and electrical designs
5 Incompleteness of drawings and
specifications.
Mean
Index
1
2
3
4
5
0
0
2
5
4
4.20
0
0
1
5
5
3.90
0
0
1
3
7
4.50
0
0
0
3
8
4.70
0
0
0
4
7
4.60
16
55
ii)
Consultants Point of View
From the consultant’s point of view, most of them have observed factors
affecting the industry as far as construction disputes are concerned are as listed below in
table 4.6. It is common practice though that we will never see things from the same
perspective, it is why we have different opinions in identifying the factors that are
actually affecting the industry in terms of disputes respectively. To prove that, results of
construction disputes caused by consultants from the consultant’s point of view are as
shown below in Table 4.6.
Table 4.6: Consultant’s Point of View
Scores
Questions
1 Failure to understand its
responsibilities under design
team contract
2 Over design and underestimating
the costs involved
3 Late information delivery and
cumbersome approach to request
for information
4 Design and specification
oversights and errors or
omissions resulting from
uncoordinated civil, architectural,
mechanical and electrical designs
5 Incompleteness of drawings and
specifications.
Mean
Index
1
2
3
4
5
0
0
2
4
2
4.00
0
0
2
2
4
4.30
0
0
1
2
5
4.50
0
0
0
1
7
4.90
0
0
0
2
6
4.80
17
56
iii)
Contractors Point of View
The results shown below clearly shows that 100% of the contractors contacted for
the survey attempted the questions. It therefore reveals that most of the contractors are
directly affected by the poor performance of the consultants because of the
consequences they suffer during the construction process. Table 4.7 below shows the
contractors point of view.
Table 4.7: Contractor’s point of view
Questions
1 Failure to understand its
responsibilities under design
team contract
2 Over design and underestimating
the costs involved
3 Late information delivery and
cumbersome approach to request
for information
4 Design and specification
oversights and errors or
omissions resulting from
uncoordinated civil, architectural,
mechanical and electrical designs
5 Incompleteness of drawings and
specifications.
Scores
Mean
Index
1
2
3
4
5
0
0
4
2
7
4.20
0
0
1
5
7
4.70
0
0
0
4
9
4.70
0
0
0
3
10
4.80
0
0
0
3
10
4.80
18
57
iv)
Overall Respondents
The graded results are of high significance in this question, it therefore reveals
that the major contributing factors are from the disputes caused by consultants. None of
the factors range within average, all most all of them they range above average, this
shows the impact it has on the performance of the industry see Table 4.8 below.
Table 4.8: Overall Respondents
Questions
1 Design and specification
oversights and errors or
omissions resulting from
uncoordinated civil,
mechanical and electrical
designs
2 incompleteness of drawings
and specifications
3 Late information delivery and
cumbersome approach to
request for information
4 over design and
underestimating the costs
involved
5 Failure to understand its
responsibilities under design
team contract
Scores
Mean
Index
1
2
3
4
5
0
0
0
7
25
4.78
0
0
0
9
23
4.72
0
0
2
9
21
4.59
0
0
4
12
16
4.38
0
0
8
11
13
4.16
19
58
4.2.3 Causes of Construction Disputes Caused by Contractors
i)
Clients Point of View
Contractors are believed to be the main culprit in dispute causation but the results
obtained from the study they dispute the ideology. The results below in table 4.9 tell us
more about the contributing factor by most contractors in the industry.
Table 4.9: Client’s Point of View
Scores
Questions
1 Inadequate contractors
management, supervision and
coordination
2 delay/ suspension of works
3 failure to plan and execute the
changes of works
4 Failure to understand and
correctly bid or price the works
5 lack of understanding and
agreement in contract
procurement
6 Reluctance to check for
clarification
7 Inadequate CPM scheduling
and update requirements
Mean
Index
1
2
3
4
5
0
0
6
2
0
3.30
0
2
5
1
0
2.80
0
2
4
2
0
3.00
0
0
2
3
3
4.10
1
3
3
1
0
2.50
0
1
3
4
0
3.80
0
2
4
2
0
3.00
20
59
ii)
Consultants Point of View
Consultants have responded to the question though their response identifies the
contractor as the main culprit in disputes causation in this regard as compared to the
client’s point of view. This again takes us back to the fact that people will never see
thing from the same perspective, nonetheless the results below in table 4.10 tells us more
on factors contributed by the contractor in the problem at hand.
Table 4.10: Consultant’s point of view
Scores
Questions
1 Inadequate contractors
management, supervision and
coordination
2 delay/ suspension of works
3 failure to plan and execute the
changes of works
4 Failure to understand and
correctly bid or price the works
5 lack of understanding and
agreement in contract
procurement
6 Reluctance to check for
clarification
7 Inadequate CPM scheduling
and update requirements
Mean
Index
1
2
3
4
5
0
3
6
2
0
2.90
0
4
4
3
0
2.90
0
2
4
5
0
3.30
0
0
3
4
4
4.40
1
3
3
4
0
2.90
0
1
6
4
0
3.30
0
2
5
4
0
3.20
21
60
iii)
Contractors Point of View
Contractors do not believe they are the major contributors to construction
disputes. They initially believe the client and the designers are the people causing the
problem due to poor planning and coordination of the project in process. The results
below in Table 4.11 really reveal that contractors are not part and parcel in causing
construction disputes and they are not the major contributing factor as per their point of
view.
Table 4.11: Contractor’s Point of View
Scores
Questions
1 Inadequate contractors
management, supervision and
coordination
2 delay/ suspension of works
3 failure to plan and execute the
changes of works
4 Failure to understand and
correctly bid or price the works
5 lack of understanding and
agreement in contract
procurement
6 Reluctance to check for
clarification
7 Inadequate CPM scheduling
and update requirements
Mean
Index
1
2
3
4
5
0
3
7
3
0
3.00
0
5
5
3
0
2.80
0
5
6
2
0
2.80
0
0
5
6
2
3.80
4
4
4
1
0
2.20
1
5
3
4
0
2.80
2
4
4
3
0
2.60
61
iv)
22
Overall Respondents
The results in Table 4.12 show how much are contractors contributing to the
problem faced and the results reveal that they are not the major contributor. To prove
that only one factor signifies often and the rest they are average and one factor is below
average.
Table 4.12: Overall Respondents
Questions
1 Failure to understand and
correctly bid or price the works
2 Reluctance to check for
clarification
3 Inadequate contractor’s
management, supervision and
coordination.
4 Failure to plan and execute the
changes of works
5 Inadequate CPM scheduling
and update requirements
6 Delay/ suspension of works
7 Lack of understanding and
agreement in contract
procurement
Mean
Index
Scores
1
2
3
4
5
0
0
10
13
9
3.97
1
7
12
12
0
3.09
0
6
19
7
0
3.03
0
9
14
9
0
3.00
2
0
8
11
13
14
9
7
0
0
2.91
2.88
6
10
10
6
0
2.50
23
62
4.2.4 Impact of Construction Disputes in Client’s Organization
i)
Client’s Point of View
The problem of construction disputes impact on all stakeholders which may lead
to inequitable modes of project delivery such as reduced margins, increased costs and
even poor quality and poor services. Most disputes are of minor nature and can be
settled quickly, fairly and amicably by the building team. The impact of construction
disputes in client organizations can be summed up as shown in Table 4.13.
Table 4.13: Client’s point of view
Question
Disciplines
Mean
Index
1
2
3
4
5
1 Cost effective
0
0
1
2
5
4.50
2 Possibility of litigation
0
0
4
2
2
3.75
3 Loss of reputation
0
0
3
4
1
4.13
4 High tender pricing
0
0
4
3
1
3.63
5 Time consuming
0
0
2
3
3
4.13
0
0
1
3
4
3.88
0
0
1
2
5
3.88
6 Loss of profit and business
validity
7 Sour relationship between
stakeholders and tenants
24
63
ii)
Consultant’s Point of View
The impact of construction disputes in client’s organization has brought about
distrust and lack of confidence in clients organization to work with consultants and
contractors. The client believes that if consultants are engaged in projects there will be a
smooth running of the project but it seems that the fact is being disputed. Some of the
factors that client thinks will be undertaken are seen to be the major cause of
construction disputes the under listed factors in Table 4.14 are results of the factors of
contributed by the stakeholders and it’s from the consultants point of view.
Table 4.14: Consultant point of view
Question
Disciplines
Mean
Index
1
2
3
4
5
1 Cost effective
0
0
2
3
6
4.36
2 Possibility of litigation
0
0
2
5
4
4.18
3 Loss of reputation
0
0
4
4
3
3.91
4 High tender pricing
0
0
5
4
2
3.73
5 Time consuming
0
0
1
2
8
4.64
0
0
0
4
7
4.64
0
0
0
5
6
4.55
6 Loss of profit and business
validity
7 Sour relationship between
stakeholders and tenants
25
64
iii)
Contractors Point of View
The impact of construction disputes in client’s organization was observed as
measured at different levels by the parties involved. In this regard the contractor was
observed seeing the impact not major in the client’s organization, the results in Table
4.15 reveals the same.
Table 4.15: Contractor’s point of view
Question
Disciplines
Mean
Index
1
2
3
4
5
1 Cost effective
0
0
1
5
7
4.46
2 Possibility of litigation
0
0
4
5
4
4.00
3 Loss of reputation
0
0
4
4
5
4.08
4 High tender pricing
0
0
6
5
2
3.69
5 Time consuming
0
0
1
4
8
4.54
0
0
1
6
6
4.38
0
0
2
5
6
4.31
6 Loss of profit and business
validity
7 Sour relationship between
stakeholders and tenants
26
65
iv)
Overall Respondents
The overall results of the impact in client’s organization due to construction
disputes were all graded above average mean, this identifies that there is a course of
concern amongst the stakeholders on the consequences the client’s organization suffers
during and after the construction process. Table 4.16 identifies the impact in client’s
organization from overall respondents.
Table 4.16: Overall Respondents
Questions
Mean
Index
Scores
1
2
3
4
5
1 Time consuming
0
0
2
13
17
4.47
2 Loss of profit and
business validity
3 Loss of reputation
0
0
4
10
18
4.44
0
0
3
12
17
4.44
4 Sour relationship
between stakeholders
and tenants
5 Cost effective
0
0
6
9
17
4.34
0
0
10
12
10
4.00
6 Possibility of litigation
0
0
11
12
9
3.94
7 High tender pricing
0
0
15
12
5
3.69
27
66
4.2.5 The Most Preferred Method of Resolving Disputes
The last question was on the most preferred method of resolving disputes in the
industry. As earlier on mentioned that people will never see things from the same
perspective, same applies in this regard, and people had deferent views in resolving
construction disputes. Respondents were requested to choose the most preferred method
that he deemed fit in resolving construction disputes and they were given three forms of
dispute resolutions, ADRs (Alternative Dispute Resolutions), Arbitration and Litigation.
The results obtained are as shown in Table 4.17 below.
Table 4.17: The Most preferred Method of Resolving Construction Disputes
Methods of Resolving
No. of Respondents
Total Percentage
disputes
1 ADRs
16
50%
2 Arbitration
10
31.25
3 Litigation
6
18.75
4.3
Analysis and Discussions
Most of the information gathered is more likely in agreement
with the
information gathered by most researchers in developed countries; therefore it proves that
even the under developing countries are faced with the same problem in the industry. In
Malaysia, the construction industry is flooded with disputes that are encountered with
other countries. It is; therefore, wise to identify the causes and the consequences of
unsolved disputes which can affect the smooth running in the construction process.
28
67
The analysis of the questionnaire was categorized into four sections. The first
section was about the causes of dispute by clients, consultants and contractors. In this
section each question is allocated with scores which values its impact, such as very rare,
rare, average, often and very often. In each of the above scores, marks are allocated in
each score for grading.
In the second section, the question is based on the impact that construction
disputes have on the client’s organization. The same method for scoring points that is
used in the first section is used again here
The third section is based on methods that can be used in solving disputes in the
industry. The question asked was “which method of solving dispute is most preferred
between arbitration, mediation and litigation”. The respondent was expected to chose the
most preferred method and was expected to give reason if any that may be affecting the
method from being effective.
Out of forty questionnaires distributed thirty two were returned as respondents and
out of the thirty two respondents thirteen were contractors, eleven were consultants and
eight from clients. Each respondent was expected to answer the first section, which was
on causes of disputes by client, consultant and contractor. The second section, the
impact of causes of dispute it has on the client’s organization and the last section which
was based on the most preferred method of solving disputes in construction industry.
The results were obtained by grouping the questionnaires according to their disciplines
that is questionnaires from contractors were put together, same applies with the other
disciplines. Scores of marks were allocated as follows:
a) Very rare
b) Rare
c) Average
d) Often
e) Very often
68
29
The overall marks were graded by means of using the mean index formula as
illustrated in previous chapter, refer to table 4.1, the major factors are also identified
according to their forms of significance to identify the most problematic factors to the
problem in question. Results obtained are discussed as follows:
4.3.1
Causes of Construction Disputes Caused by Clients
i)
Clients Point of View
The client has observed that most of the factors that are causing construction
disputes are of various reasons and they have an effect in the industry. It has been
observed that as much as the factors are contributing to the problem they have different
significances, there were those with major significance and there were those with
average significance though none of the factors had been observed below average.
Nonetheless the fact remains that they were the root causes of construction disputes and
they are a subject matter in this regard and they are a subject for remedy. The major
factors that were observed by the client as contributing factors are as shown below in
their order of significance:
•
Poor communication amongst members of the team.
•
Failure to respond in timely manner.
•
Failure to appoint a project manger.
•
Deficient management, supervision and coordination efforts on the part of the
project.
•
Reluctance to check for constructability, clarity and completeness.
•
Discrepancies/ ambiguities in contract documents.
•
Inadequate tracing mechanisms for the request of information.
•
The absence of team spirit amongst members of the participants.
30
69
ii) Consultants Point of View
The consultants had observed that factors contributing to the problem caused by
the client are of average significance. This means that they are in fact a contributing
factor even though they are not the major significance. It becomes clear that the remedy
for such factors can be easily resolved. Most of the factors were graded below the often
significance and the factors observed by the consultant as main contributors are as listed
below, they are:
iii)
•
Failure to respond in timely manner.
•
Poor communication amongst members of the team.
•
Failure to appoint a project manager.
•
Deficient tracing mechanisms for the request of information.
•
Reluctance to check for constructability, clarity and completeness.
•
The absence of team spirit amongst members of the participants.
Contractors Point of View
Contractors observed construction disputes caused by client as of average
significance except for only one that was observed as the major contributing factor. The
major contributing factor observed by the contractor was the poor communication
amongst members of the team, it really proves that communication break down is a
major factor in this regard because client and consultant has also observed the same
factor as the major contributing factor to the problem. Factors observed by the contractor
as contributing factors in their order of significance to the problem besides the one
mentioned above were:
•
Lowest price mentality in engagement of contractor’s designers.
•
Deficient management, supervision and coordination efforts on the part of
the project.
•
Discrepancies/ ambiguities in contract documents.
31
70
iv)
•
Reluctance to check for constructability, clarity and completeness.
•
Failure to respond in timely manner.
•
Failure to appoint a project manager.
•
Inadequate tracing mechanisms for the request of information.
•
The absence of team spirit amongst members of the participants.
Overall Respondents
The overall response on causes of construction disputes by client was observed as
average significance to the problem. The respondents viewed this from different angles
as factors that were observed as major contributing factors were not of the same caliber,
furthermore the significance of the factors differed from one another. Client observed
differently from consultants same applies with contractors. This implies that factors
affecting disciplines in construction sites differs from one another and it also counts on
how much is that particular factor affecting that discipline. The results revealed that the
major contributing factor was the poor communication breakdown amongst members of
the team.
At most communication in the contraction industry plays a vital roll, this is
because of the information that has to be communicated from one party to another in a
short period of time. Construction is basically based on time frame so everything done is
basically done against time, if information would take long to be received by the other
party because of poor communication automatically the project will delay and that is a
major cause of construction dispute on its own. The essence of a contract is to fulfill the
obligations required in time.
Factors observed as major factors in this case were as follows and they are in their order
of significance:
•
Poor communication amongst members of the team.
•
Failure to appoint a project manager.
32
71
•
Failure to respond in timely manner.
•
Deficient management, supervision and coordination efforts on the part of
the project.
•
Reluctance to check for constructability, clarity and completeness.
•
Discrepancies/ ambiguities in contract documents.
•
The absence of team spirit among the participants.
•
Inadequate tracing mechanisms for the request of information.
•
Lowest pricing mentality in engagement of contractors designs.
4.3.1.1 Summary
The overall response on construction disputes caused by clients reveals that most
of the factors observed to be of major significance, ranging between the averages and
often while none were measured below average. It is clear that most of the factors
contributed by the client were averagely contributing to the problem. Below a fish bond
diagram (Fig. 4.1) shows the factors contributed by clients.
33
72
Reluctance to check for
constructability, clarity and
completeness
Poor communication among
members of the team
Failure to respond in timely
manner
Inadequate tracing
mechanisms for the request of
information
Dispute
Failure to appoint a
project manager
Discrepancies/ambiguities
in contract documents
The absence of team
spirit among members
Lowest price mentality in
engagement of contractor’s design
Deficient management, supervision and coordination efforts on
the part of the project
Figure 4.1: Fish bone diagram showing major causes of disputes caused by clients
4.3.2
Causes of Construction Disputes Caused by Consultants
i)
Clients Point of View
Cause of construction disputes caused by consultants were few in number that
were eventually identified as root causes nonetheless they were observed as the major
contributing factors in this regard and the significance of their occurrences were
observed to be above the often significance. This revealed that the major contributor to
the problem faced were consultants (designers). It is common practice in the industry
more especially in the traditional procurement system that an architect will lead the
34
73
team, this is where most of the dispute arises when the architect as designer and leader at
the same time would fail to produce drawings in time or incomplete drawings or rather
issue deficient drawings to the contractor.
The architect on the other hand will be the one reported too if the contractor
wants to loge a protest on some of the technicalities that went wrong take for instance
excusable delays due to deficient drawings or late delivery of drawings, at most the
architect would award a resolution on his favor and this ill lead to a dispute. The client
in this regard observed that consultants were the major contributor based on the
following factors:
•
Design and specification oversights and errors or omissions resulting from
uncoordinated civil, architectural, mechanical and electrical designs.
•
Incompleteness of drawings and specifications.
•
Late information delivery and cumbersome approach to request for
information.
ii)
•
Failure to understand its responsibilities under design team contract.
•
Over design and underestimating the costs involved.
Consultants Point of View
The circulation of information from one consultant to the other was cited as root
cause amongst the consultants, therefore they end up pointing fingers to each other as he
is the cause of the problem. Nonetheless the finger pointing had ended up as a major
contributing factor to that fact and it had caused them in identifying different
contributing factors to the problem at hand. The significance of the factors was observed
to be above often to very often. They had thus observed major contributing factors in
their order of significance as follows:
•
Design and specification oversights and errors or omissions resulting from
uncoordinated civil, architectural, mechanical and electrical designs.
•
Incompleteness of drawings and specifications.
35
74
•
Late information delivery and cumbersome approach to request for
information.
iii)
•
Over design and underestimating the costs involved.
•
Failure to understand its responsibilities under design team contract.
Contractors Point of View
Causes of construction dispute caused by consultants are of major impact to the
contractor thus leading to serious disputes. The lack of appropriate information from
drawings compels the contractor to seek for clarity from the consultant and these will
lead to delay in the construction progress eventually causing disputes. From the results
obtained from this study they revealed that consultants had few major factors that they
were failing to handle for the smooth running of the project, though these factors were
few but they had major significance in the problem faced. All the factors were ranging
above often and very often significance. This proved that such factors are a course of
concern to the industry and the factors identified by contractor as major root causes were
as listed below in their order of significance:
•
Design and specification oversights and errors or omissions resulting from
uncoordinated civil, architectural, mechanical and electrical designs.
•
Incompleteness of drawings and specifications.
•
Late information delivery and cumbersome approach to request for
information
iv)
•
Over design and underestimating the costs involved.
•
Failure to understand its responsibilities under design team contract.
Overall Respondents
The course of concern to all parties in this regard was a subject matter and it
proved that consultants were really the major contributing factor to the problem. All of
the factors identified were of high significance ranging from often to very often
75
36
significance, this means they were frequently occurring thus causing disputes that lead to
the project suffering at the end. To incapacitate the subject matter the following factors
were identified as the major contributing factors and they are arranged in their order of
significance:
•
Design and specification oversights and errors or omissions resulting from
uncoordinated civil, architectural, mechanical and electrical designs.
•
Incompleteness of drawings and specifications.
•
Late information delivery and cumbersome approach to request for
information.
•
Over design and underestimating the costs involved.
•
Failure to understand its responsibilities under the design team contract.
4.3.2.1 Summary
The response reveals that consultants were observed as the most significant
contributors to the problem. Five factors related to this were ranging above the often
scale and this reveals that they were occurring frequently thus causing serious disputes.
The fish bone diagram below (fig. 4.2) shows the factors contributed by consultants.
37
76
Design and specification oversight and errors
or omissions resulting from uncoordinated
civil, architectural, mechanical and electrical
designs
Failure to understand its
responsibilities under the design
team contract
Incompleteness of drawings
and specifications
Dispute
Over design and underestimating
the costs involved
Late information delivery and
cumbersome approach to request for
information
Figure 4.2: Fish bone diagram showing major causes of disputes caused by consultants
4.3.3
Causes of Construction Disputes Caused by Contractor
i)
Client’s Point of View
The clients had observed that contractors were also contributing to the problem
though their contributing factor was identified as minimal or rather not major
contributing factors. From the results obtained the factors were ranging average and
below average this revealed that the contractors were not a major contributing factor in
this regard. The client observed the factors as listed below in their order of significance:
•
Failure to understand and correctly bid or price the works.
•
Reluctance to check for clarification.
•
Inadequate contractor’s management, supervision and coordination.
•
Failure to plan and execute the changes of works.
38
77
•
ii)
Inadequate CPM scheduling and update requirement.
Consultants Point of View
The consultants had also observed that causes of construction disputes caused by
contractor were not a course of concern even though one was identified as a major factor
to the problem. This revealed that contractors were not the major contributor in causing
construction disputes but instead they were observed as the suffering ends. The
consultants had observed the following factors as average contributing factors:
iii)
•
Failure to understand and correctly bid or price the works.
•
Failure to plan and execute the changes of works.
•
Reluctance to check for clarification.
•
Inadequate CPM scheduling and update requirements.
Contractors Point of View
Contractors had observed that there were not part and parcel in causing
construction disputes this was of the fact that few of their factors identified as
contributing factors were ranging average and most of them below average. These
clearly shows that contractors were doing their best in avoiding disputes in construction
sites but instead they were doing what they new best in the construction process. The
few factors that were identified as contributing factors were:
•
Failure to understand and correctly bid or price the works.
•
Inadequate contractor’s management, supervision and coordination.
•
Reluctant to check for clarification.
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39
iv)
Overall respondents
The overall respondents revealed that contractors were not the major contributing
factor to the problem though few factors identified as averagely contributing factors
were observed. This revealed that contractors were really cooperating towards fulfilling
the obligations intended in achieving their goal. The factors identified by the overall
respondents as contributing factors by the contractors were:
•
Failure to understand and correctly bid or price the works.
•
Reluctance to check for clarification.
•
Inadequate contractors management, supervision and coordination
•
Failure to and execute the changes of works
•
Inadequate CPM scheduling and update requirements
4.3.3.1 Summary
The response revealed that contractors were observed as averagely contributing
to disputes. Five factors ranged the average and above and this reveals that their
contribution had not much effect to the problem. The fish bone diagram below (Fig. 4.3)
shows the factors observed to be contributed by contractors.
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40
Inadequate CPM scheduling
and update requirements
Failure to understand and
correctly bid or price the
works
Reluctance to check for
clarification
Dispute
Failure to plan and
execute the changes of
works
Inadequate contractor’s management,
supervision and coordination
Figure 4.3: Fish bone diagram showing major causes of disputes caused by contractors
4.3.4
Impact of Construction Disputes in Client’s Organization
i)
Client’s Point of View
The problem of construction disputes impact on all stakeholders which may lead
to inequitable modes of project delivery such as reduced margins, increased costs and
even poor quality and poor services. Most disputes are of minor nature and can be
settled quickly, fairly and amicably by the building team. The impact of construction
disputes in client’s organization had been observed as a drawback in the industry and at
most all the participants observed it at a similar angle. The clients observed it this way:
•
Time consuming.
•
Loss of reputation.
•
Loss of profit and business validity
•
Sour relationship between stakeholders and tenants
•
Cost effective
•
Possibility of litigation and
•
High tender pricing
41
80
ii)
Consultants Point of View
The impact of construction disputes in client’s organization did not actually
affected the client’s organization per say but all the parties involved had been affected
by the actions taken against other disciplines during the process of trying to resolve the
dispute at hand. The consultants thus observed that the side effects of construction
disputes also played a major roll in spoiling the companies’ names that were involved in
that project. It was for this reason they saw it as a major draw back to all parties
involved. The consultants observed the listed factors below as major drawbacks and
these were:
iii)
•
Loss of profit and business validity
•
Time consuming
•
Sour relationship between stakeholders and tenants
•
Cost effective
•
Loss of company reputation
•
Possibility of litigation
•
High tender pricing.
Contractors Point of View
Contractors had observed the same way the consultant had observed it and this
revealed that all most all the parties involved observed that disputes were a course of
concern to this problem at hand and the only resolution to this was identified as avoiding
construction disputes for the smooth running of construction projects.
iv)
Overall respondents
Construction disputes are observed as a burden in the industry and they have a
remedy that will not be cost effective to neither of the parties partaking in that particular
project. The overall respondents observed that most of the identified factors were
drawback in the industry and they were a subject matter in this regard. The respondents
42
81
observed the following factors as major drawbacks and they are in their order of
significance:
•
Time consuming
•
Loss of profit and business validity
•
Loss of reputation
•
Sour relationship between stakeholders and tenants
•
Cost effective
•
Possibility of litigation
•
High tender pricing
4.3.4.1 Summary
The results obtained reveals that all parties involved showed a cause of concern
to the impact of construction disputes. It can be observed that the factors identified are
frequently occurring thus causing serious impact in client’s organization. In concluding,
the impact of disputes to client’s organization are shown below (Fig. 4.4) in a fish bone
diagram.
82 43
Loss of profit and business
validity
High tender pricing
Cost effective
Loss of company’s reputation
Impact in client’s
organization
Possibility of
litigation
Time consuming
Sour relationship between
stakeholders and tenant
Figure 4.4: Fish bone diagram showing the impact of disputes in client’s organization.
4.3.5 The Most Preferred method of resolving disputes
Results obtained in this effect showed a major concern from all parties due to the
fact that disputes occurring in the industry are good business to other professions. The
respondents thus preferred to select the best method that has no effect to them as
entrepreneurs. The method was observed to be cheap and very quick in resolving
construction disputes without delaying the project. This has resulted in most members
preferring ADRs as the most suitable method to resolve disputes. There were factors
though that were identified to be affecting the selection of the resolving methods, these
were the nature of the dispute, interest in the dispute, technicalities of the dispute and
lack of trust among members of the team thus leading the award being biased.
From interviews conducted with professionals within the city of Johor Bahru, the
researcher observed that most cases were not treated fairly thus people preferred to
engage lawyers for their self interests. The lack of transparency in awarding decisions in
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44
any dispute occurred it has affected the industry. The engagement of construction
professionals has been observed a major concern in this subject matter. The reasons
cited were, professionals in the industry would handle the matter with diligent care
because they have an idea about the industry and they have a clear understanding of the
technicalities in the construction process. So this would enable them to award fair
judgment in any dispute that might occur.
45
Chapter 5
CONCLUSIONS AND RECOMMENDATIONS
5.1
Introduction
This is the last chapter of the study; it includes the recommendations based on
the findings and conclusion. The main objective of the study is to identify the causes of
construction disputes and the impact of construction disputes in the client’s organization.
Recommendations will be suggested on how to avoid the causes of construction disputes
for Malaysian construction industry. This study has also help in identifying the most
preferred method of solving disputes in the industry that is most preferred by the parties
involved in the industry in Malaysia.
5.2
Conclusions
Interviews were held with professionals within the city of Johor Bahru to verify
the most important parts that needed most concentration in order to achieve the
objectives of the study. The conclusion can be drawn from the findings to justify the
results obtained from this study and the data collected being the true reflection of the
results obtained. Moreover the factors observed as major factors to the problem in
question none of them were under-graded, this means there are effective to the industry
and a remedy to this is a must to keep the industry performing to its full capacity.
85 46
5.2.1 Identifying the Causes of Major Contributors of Construction Disputes
The results reveal that most significant causes of construction disputes
contributed by the designers are incompleteness of drawings and specifications, design
and specification oversight and errors or omissions resulting from uncoordinated civil,
structural, mechanical and electrical designs. Poor communication is another factor that
has contributed in causing disputes in this regard.
Causes of construction disputes contributed by the client are deficient or poor
management, supervision and coordination efforts on the part of the project have
ambiguities in contract documents, reluctance to check for constructability, clarity and
completeness of construction process.
Moreover, the most causes of construction disputes contributed by the contractors
are delays, poor supervision of works executed on sites, inadequate contractor’s
management, and coordination, failure to understand and correctly bid or price the
works, reluctance to seek clarification and failure to plan and execute the changes of
works.
Below is a fish bone diagram (Fig. 5.1) showing the major contributing factors to the
problem.
86
47
Design and
specification
oversight and
errors or
omissions
resulting from
uncoordinated
civil,
architectural,
mechanical and
electrical designs
Late information
delivery and
cumbersome
approach to
request for
information
Failure to
understand its
responsibilities
under the design
team contract
Incompleteness
of drawings and
specifications
Inadequate contractor’s
management,
supervision and
coordination
Reluctance to check
for clarification
Over design and
underestimating
the costs
involved Failure to plan and execute the
changes of works
Failure to
understand and
correctly bid or
price the works
Dispute
Lowest price mentality in
engagement of contractor’s designers
Failure to respond in timely
manner
Reluctance to check for constructability,
clarity and completeness
Poor communication among
members of the team
Discrepancies/ ambiguities in
contract documents
Deficient management, supervision and
coordination
The absence of team
spirit among the
participants
Inadequate tracing mechanisms for the
request of information
Failure to appoint a project
manager
Figure 5.1: Fish bone diagram showing all major root causes of construction disputes
5.2.2 Identifying the Impact of Construction Disputes in Client’s Organization
From the findings all parties respondent positively in this regard, time, delays and
cost overruns, diminution of respect between parties, deterioration of relationship and
breakdown in cooperation and expenses in managerial and administration are concluded
48
87
in the findings as the most significant impact of construction disputes on client’s
organization
5.2.3 The Most Preferred Method of Resolving Disputes
It can be concluded from the results that the most preferred method of resolving
disputes was the ADR (mediation, conciliation and negotiation). This has been observed
as the fastest and none cost effective method in resolving disputes. Unlike the other
methods witch are observed to be time consuming and cost effective.
Change of clauses in the JKR will be of good benefit to the industry in as far as
managing construction disputes is concerned, though change is not easily accepted in the
society but for piece to reign in the industry the above mentioned point should be
considered. Clauses that encourages litigation should be avoided so that problems could
be easily solved at grass root level without the involvement of none professions of this
industry. Only professionals in the industry must solve such kind of disputes without
being biased. Such problems can even be easily avoided; moreover this prevention is
better than cure.
5.3
Recommendations
This study has identified the root causes of construction disputes caused by
various parties involved in the industry and they were analyzed to identify their effects
in the industry. The impact of construction disputes in client’s organization were also
identified and analyzed to measure their effect in the industry and furthermore ADRs
were observed as the best method to resolve disputes in Malaysia. However there are
recommendations for future research and these are as listed below:
•
The research has been conducted within the city of Johor Bahru only, this study
49
88
can be expanded by taking samples in other cities in Malaysia.
•
The data collected in this research did not specify the categories of contractors as
stipulated by the registrar of contractors in Malaysia. Data must be collected
from contractors at different categories in order to identify the major contributing
factors at different levels.
•
In this research ADRs are observed as the best method for resolving disputes.
For further studies a better method for resolving disputes can be developed.
.
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89
REFERENCES
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Bachner, J. (1988). ADR, alternative dispute resolution for the construction industry, 18
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Battelle, A.E. (1995). The growing impact of AD on the construction industry: ‘Real
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Carmicheal, D.G. (2002). Disputes and international projects. Liisse: A.A.
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Fenn, P. Lowe, D. and Speek C. Conflict and dispute in construction.
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Groton, J. P. (1996). A new, comprehensive approach to dispute avoidance and
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Goyal, B.B. construction claims and disputes. Causes and coat/ time overruns. Journal
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Groton, J. (1991). Preventing and Resolving Construction Disputes, CPR Legal Program
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Hall, J.M. (2002). Ineffective communication: Common causes of construction disputes.
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Hellard, B.R. (1997). Preventing and solving construction contract disputes.
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Hohns, M.H. (1979). Preventing and solving construction disputes. New York: van
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Jessup, W. E., Jr., and Jessup, W.E. (1963). Law and specifications for engineers and
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McManamy, R. (1994). “Industry pounds away at disputes.’ Eng. News, 24,3.
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Ruskin, A. M., and Estes, W. E. (1982). What every engineer should know about project
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Stipanowich, T.J. (1998a). Reconstructing construction law: Reality and reform in a
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APPENDIX 1
QUESTIONNAIRE SURVEY
Research Title: MANAGING CONSTRUCTION DISPUTES
This research aims to manage or rather avoid construction disputes in
construction sites. The purpose of the survey is to collect information on construction
disputes at large by using the approach shown below from relevant stakeholders with
vast experience in the industry.
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53
Causes of Construction Disputes in Construction Industry
Questionnaire survey
Section I: Company and Respondent Profile
Please fill in the blank space or tick in the box where appropriate.
1. Respondent Name
:
2. Company Name
:
3. Type of Job/ Position:
4. Experience:
Less than 5 years
5 years to 10 years
10 years and above
5. Type of Organization.
Client
Consultant
Contractor
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93
Causes of Construction Disputes in the Construction Industry
Section II
Please indicate your opinion for the following causes of construction disputes
Indicator,
1;
2;
3;
4;
5;
Very rare
Rare
Average
Often
Very often
A. Causes of construction Disputes by client
1) Failure to respond in timely manner.
1 2 3 4 5
2) Inadequate tracing mechanisms for RFIs.
1 2 3 4 5
3) Reluctant to check for constructability,
Clarity and completeness.
1 2 3 4 5
4) Discrepancies or ambiguities in contract documents.
1 2 3 4 5
5) Poor communication among members of the team.
1 2 3 4 5
6) Failure to appoint an overall project manager.
1 2 3 4 5
7) Lowest price mentality in engagement of contractors
And designers
1 2 3 4 5
8) The absence of team spirit among members of the team.
1 2 3 4 5
9) Deficient management, supervision and coordination
efforts on the part of the project.
1 2 3 4 5
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55
Causes of Construction Disputes in the Construction Industry
B. Causes of construction disputes by consultants
1) Failure to understand its responsibilities under the design
team contract.
1 2 3 4 5
2) Over-design and underestimating the costs involved.
1 2 3 4 5
3) Late information issued and cumbersome approaches
to RFIs.
1 2 3 4 5
4) Inadequate in open and factual communication.
1 2 3 4 5
5) Design and specification oversights and errors or omissions
Resulting from uncoordinated civil, structural, architectural,
mechanical and electrical designs.
1 2 3 4 5
6) Incompleteness of drawings and specifications.
1 2 3 4 5
C. Causes of construction disputes by contractor
1) Inadequate contractor management, supervision
and coordination.
1 2 3 4 5
2) Lack of understanding and agreement in contract
procurement system.
1 2 3 4 5
3) failure to understand and incorrectly bid or
estimating the works.
1 2 3 4 5
4) Reluctance to seek clarification.
1 2 3 4 5
5) Failure to plan and execute the changes of works.
1 2 3 4 5
6) Inadequate CPM scheduling and update requirements.
1 2 3 4 5
7) Delay due to suspension of works.
1
2 3 4 5
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56
Causes of Construction Disputes in the Construction Industry
Section III
The Impact of Construction Disputes in Clients Organization
•
Additional expense in managerial and administration
1 2 3 4 5
•
Possibility of litigation cases
1 2 3 4 5
•
Loss of company reputation
1 2 3 4 5
•
Loss of profitability and perhaps business viability
1 2 3 4 5
•
Time delays and costs overruns
1 2 3 4 5
•
Extended and / or more complex award process
1 2 3 4 5
•
Loss of professional reputation
1 2 3 4 5
•
Diminution of respect between parties and deterioration of
1 2 3 4 5
relationship and break down in cooperation
1 2 3 4 5
•
High tender prices
1 2 3 4 5
•
Rework and relocation costs for men, equipment and materials
1 2 3 4 5
96 57
Causes of Construction Disputes in the Construction Industry
Section IV.
The Most Preferred Method for Resolving Construction Disputes
Please circle the most preferred answer.
1) From your own opinion, which is the best solution to resolve disputes?
a) ADR (Negotiation, Conciliation, Mediation, etc.)
b) Arbitration
c) Litigation
2) Is the method effective? Yes or Not
3) If not please state your reasons, what are the factors affecting the method not
to be effective?