MINIMISING CONSTRUCTION DISPUTES
NORAZIAH BINTI WAHI
A project report submitted in partial fulfilment of the
requirements for the award of the degree of
Master of Sciences (Construction Management)
Faculty of Civil Engineering
Universiti Teknologi Malaysia
NOVEMBER 2008
iii
To my beloved family and friends,
Thank you for all your support and guidance
iv
ACKNOWLEDGEMENTS
I am grateful to Allah, the Almighty for making all good things possible.
First of all, I would like to express my gratitude to my Supervisor, Associate Prof.
Aziruddin Ressang who had patiently read through my drafts, his unfailing supports and
contribution of ideas in preparing this dissertation. I also appreciate and deep
acknowledge his willingness to motivate, insightful supervision as well as his creative
suggestions throughout the course of this research.
My appreciation also goes to Tuan Haji Mohd Nazir bin Ismail and all lecturers from
the Department of Quantity Surveying, Faculty of Architecture, Planning and
Surveying, Universiti Teknologi Mara and Faculty of Civil Engineering, Universiti
Teknologi Malaysia, who had given me the benefits of their knowledge and guidance in
making constructive suggestions for this research. A grateful acknowledgement is also
addressed to Tuan Haji Mohammad Noor Abu Hassan, the senior engineer in Perunding
Zar, for his approachable and generous counsel in dispensing the useful sources for this
research. My special thanks also go to all those who had agreed to be interviewed,
formally or informally and gave me the advantage of their knowledge, views and
experience. I am also thankful to my friends for their moral support and encouragement
during the preparation of this dissertation.
Last but not least, I would also like to extend my sincere and heartiest thanks to my
beloved parents and family, who had never failed to give me their encouragement and
moral support, thus enabling me to complete this dissertation with pride and
satisfaction.
v
ABSTRACT
Construction industry plays an important role in developing Malaysia and it is a
major contributor towards realizing Vision 2020. It is totally different from
manufacturing industry whereby the same construction team will not be able to produce
the same products even though the projects have similar nature of construction. Owing
to the complex, disputes between different parts within these interacting fragments is
highly foreseeable. This study was conducted to identify the causes and effects of
disputes in construction industry, as well as ways to mitigate disputes. Results from the
survey conducted indicated that the causes of disputes in general between major parties
involved in construction projects are various, with certain considered as major, others
considered as quite significant and up to certain extent, some are considered of less
significant but nonetheless could still give birth to disputes. Categorically the major
effects of disputes are those that concerns time as well as money, while those
consequences from the legal terms was also considered significant as the other potential
effects of disputes. However, all parties involved do not seem to care much of the
potential effects of disputes on their reputation as well on third parties. Dispute can
effectively be avoided or mitigated by adopting certain or series of dispute avoidance
activities. Although effective, these dispute avoidance approaches does not guarantee
anybody full exclusion from experiencing disputes. Of all the dispute avoidance
approach suggested the partnering approach was seen as the most effective but probably
the hardest to be adopted. The content as well as the outcome of this study was hoped to
be able to serve as a source of reference for various participants of construction industry
with regards to the matters of disputes in construction industry.
vi
ABSTRAK
Industri pembinaan penting dalam pembangunan Malaysia dan turut
menyumbang ke arah pencapaian Wawasan 2020. Sektor pembinaan adalah berlainan
dibandingkan dengan sektor pembuatan, dimana produk yang sama tidak dapat
dihasilkan meskipun melalui proses pembinaan yang sama. Disebabkan sifat industri itu
sendiri yang agak kompleks, pertelingkahan antara pihak ataupun pecahan yang
pelbagai serta berinteraksi ini sering terjadi. Kajian dijalankan bagi mengenalpasti
punca-punca serta kesan-kesan pertelingkahan yang wujud dalam industri pembinaan,
selain
daripada
mengetengahkan
kaedah-kaedah
bagi
mengelak
berlakunya
pertelingkahan. Hasil kaji selidik yang dijalankan menunjukkan secara amnya, puncapunca pertelingkahan antara pelbagai pihak dalam industri tersebut adalah pelbagai,
yang mana ada antaranya dianggap sebagai punca utama, ada pula dianggap agak
penting dan sebahagian pula dirasakan tidak begitu penting sebagai punca
pertelingkahan. Dari segi kesannya pula, ianya boleh dikategorikan ke dalam kesankesan yang berkaitan dengan masa dan wang, disamping kesan-kesan yang berkaitan
dengan aspek perundangan. Walaubagaimanapun, kebanyakan pihak yang terlibat tidak
begitu mengambil berat berkenaan kesan pertelingkahan terhadap reputasi mereka.
Pertelingkahan mampu dielakkan dengan mengguna pakai kaedah ataupun kombinasi
kaedah-kaedah yang pelbagai. Meskipun berkesan, kaedah-kaedah ini bukanlah jaminan
pengecualian sepenuhnya terhadap berlakunya pertelingkahan. Kaedah kerjasama antara
dua ataupun pelbagai pihak dilihat sebagai kaedah terbaik namun mungkin yang paling
sukar untuk dilaksanakan. Adalah diharapkan, kandungan serta hasil daripada kajian ini
dapat digunakan sebagai rujukan bagi pihak-pihak yang terbabit dalam industri
pembinaan dari segi perkara yang berkaitan dengan pertelingkahan.
vii
TABLE OF CONTENTS
Chapter
I
II
Contents
Page
Declaration
ii
Dedication
iii
Acknowledgements
iv
Abstract
v
Contents
vii
List of Figure
xi
List of Tables
xii
INTRODUCTION
1
1.1
Introduction
1
1.2
Problem Statement
2
1.3
Aim of Study
3
1.4
Objectives of Study
4
1.5
Scope of Research
4
1.6
Significance of Research
5
1.7
Research Methodology
5
MINIMISING CONSTRUCTION DISPUTES
7
2.1
Introduction
7
2.2
Definition of Disputes
8
2.3
Nature of Construction Dispute
9
2.4
2.3.1 Enforceable Promises
9
2.3.2 Technical Matters
10
2.3.3 Legal Matters
10
2.3.4 Entitlement and Magnitude
11
Sources of Disputes
12
viii
Chapter
Contents
2.5
Page
2.4.1 Inconsistencies of Contract
14
2.4.2 Payment
15
2.4.3 Determination of Contract
16
2.4.4 Variation
17
2.4.5 Lack of Communication
17
Causes of Disputes In General
2.5.1 Causes of Disputes by Stakeholders
2.6
21
2.5.1.1 Clients
22
2.5.1.2 Consultants
24
2.5.1.3 Contractors
26
Effect of Disputes
2.6.1 Effect on Cost and Profitability
2.7
18
28
28
2.6.1.1 Financial Costs
29
2.6.1.2 Hidden Costs
29
2.6.1.3 Reducing Profit Margin
30
2.6.2 Effect on Time
30
2.6.3Effect on Quality
31
2.6.4 Effect on Business and Working Relationship
31
2.6.5 Dispute Escalation (Chain Reaction)
32
2.6.6 Emotional Costs
33
Avoiding Disputes
35
2.7.1 Partnering Approach
35
2.7.2 Clarification of Responsibilities
36
2.7.2.1 Client
36
2.7.2.2Contractor
37
2.7.2.3 Consultant
37
2.7.3 Risk Allocation
38
2.7.4 Increase Ability to Resolve Problems
39
ix
Chapter
III
Contents
Page
RESEARCH METHODOLOGY
41
3.1. Introduction
41
3.2. Literature Review
41
3.3. Data & Information Gathering
42
3.3.1 Primary Data and Information
3.3.1.1 Questionnaires
42
3.3.1.1.1 Method of Questionnaire Collection
43
3.3.2 Secondary Data and Information
3.4. Data Analysis and Interpretation
IV
42
44
44
3.4.1 Frequency Analysis
44
3.4.2 Average Index Analysis
45
3.5. Conclusions and Recommendations
45
DATA COLLECTION AND ANALYSIS
47
4.1.
Introduction
47
4.2.
Questionnaire Feedback
48
4.3. Analysis and Results
51
4.3.1 Causes of Construction Disputes in General
51
4.3.2 Causes of Construction Disputes by Client
58
4.3.3 Causes of Construction Disputes by Consultant
66
4.3.4 Causes of Disputes by Contractor
73
4.3.5 The Effect of Disputes to Stakeholders in the
Construction Industry
4.3.6 Disputes Avoidance in Construction Industry
4.3.6.1 Management Role in Avoiding Disputes
80
89
96
x
Chapter
V
Contents
Page
CONCLUSION AND RECOMMENDATION
101
5.1
Introduction
101
5.2
Conclusion
102
5.3
Recommendation
104
BIBLIOGRAPHY
106
APPENDIX A
110
xi
List of Figure
Page
Figure 1.1
: Methodology Flowchart
6
Figure 2.1
: Causes of Disputes in General
20
Figure 2.2
: Causes of Disputes Caused by Client
23
Figure 2.3
: Causes of Disputes Caused by Consultant
25
Figure 2.4
: Causes of Disputes Caused by Contractor
27
Figure 2.5
: Effects of Construction Disputes
34
Figure 2.6
: Disputes Minimisation
40
Figure 4.1
: Distribution Percentage of Questionnaire Sampling
48
Figure 4.2
: Distribution of Stakeholders Percentage
49
Figure 4.3
: Respondents’ Years of Working Experience
50
Figure 4.4
: Respondents Awareness on Several Disputes Approach
92
Figure 4.5
: Respondents Practise of Several Disputes Avoidance
Approach
: Respondents Success in Avoiding Disputes by
Practising Several Disputes Avoidance Approach
: Management Practise on Several Disputes Avoidance
Approach
: Management Success in Avoiding Disputes by
Practising Several Disputes Avoidance Approach
92
Figure 4.6
Figure 4.7
Figure 4.8
93
97
97
xii
List of Table
Table 2.1
Table 4.1
Table 4.2
Table 4.3
Table 4.4
Table 4.5
Table 4.6
Table 4.7
Table 4.8
Table 4.9
Table 4.10
Table 4.11
Table 4.12
Table 4.13
Table 4.14
Table 4.15
Table 4.16
Table 4.17
Table 4.18
Table 4.19
Table 4.20
: Research on the Sources of Conflicts and Disputes
In Construction Industry
: Response Percentage
: The Percentage of Respondent Based on Organisation
: Tabulation of Respondents’ Years of Working
Experience
: Client’s point of view (Causes of Construction Disputes
in General)
: Consultant’s point of view (Causes of Construction
Disputes in General)
: Contractor’s point of view (Causes of Construction
Disputes in General)
: Overall Respondents (Causes of Construction Disputes
in General)
: Client’s point of view (Causes of Construction Disputes
by Clients)
: Consultant’s point of view (Causes of Construction
Disputes by Clients)
: Contractor’s point of view (Causes of Construction
Disputes by Clients)
: Overall Respondents (Causes of Construction Disputes
by Clients)
: Client’s point of view (Causes of Construction Disputes
by Consultants)
: Consultant’s point of view (Causes of Construction
Disputes by Consultants)
: Contractor’s point of view (Causes of Construction
Disputes by Consultants)
: Overall Respondents (Causes of Construction Disputes
by Consultants)
: Client’s point of view (Causes of Construction Disputes
by Contractors)
: Consultant’s point of view (Causes of Construction
Disputes by Contractors)
: Contractor’s point of view (Causes of Construction
Disputes by Contractors)
: Overall Respondents (Causes of Construction Disputes
by Contractors)
: Client’s point of view (The Effect of Disputes to
Stakeholders in the Construction Industry)
Page
13
48
49
50
51
53
55
56
59
61
62
64
67
68
70
71
74
75
77
79
81
xiii
Table 4.21
Table 4.22
Table 4.23
: Consultant’s point of view (The Effect of Disputes to
Stakeholders in the Construction Industry)
: Contractor’s point of view (The Effect of Disputes to
Stakeholders in the Construction Industry)
: Overall Respondents (The Effect of Disputes to
Stakeholders in the Construction Industry)
83
85
87
1
CHAPTER I
INTRODUCTION
1.1
Introduction
Construction industry plays an important role in developing Malaysia and it is a
major contributor towards realising Vision 2020. The industry contribute 3.3 percent of
the countries gross domestic product (GDP) in year 2003 and employs more than 500,000
workers in some 54,500 local companies. In year 2003 more than 3000 local contracts
have been awarded to contractor with the total value of RM4.8 billion. The housing and
infrastructure project has been the biggest contributor to the construction industry which
contributes more than 70% of the total value, Yusof; M.A et al. (2007).
Construction is totally different from manufacturing industry where the same
products with the same quality are possible to be produced even at a thousand times of its
production. In construction, the same construction team will not be able to produce the
same products even though the projects have similar nature of construction because there
would be differences in regulation, site conditions and market conditions for each project.
Global-wise, the construction industry has been identified as a ‘… loosely coupled
system … characterized by … particular complexity factors owing to industry specific
uncertainties and interdependencies, and inefficiency of operations’ stated by Dubois &
2
Gadde (2002). The separation between the design and construction processes, the
fragmentation evident in the management of the construction process by subcontract, and
the short term project focus of the contractual relationships between participants results in
little incentive or opportunity to improve inter-organizational practices. With respect to
this, there are various participants in this industry. These included; clients, regulatory
agencies, engineers, quantity surveyors, developers, lawyers, suppliers, contractors,
architect and the list goes on. Their obligations and objectives varied, based on their
contractual relationship for each projects. Owing to this complex, fragmented nature of
this industry, disputes between different parts within these interacting fragments is highly
foreseeable.
1.2
Problem Statement
Dispute in construction industry may it be in the form of financial , legal or any
other form is an important subject that requires attention of the industry ‘players’. Within
the scope of the industry itself, disputes most often than not leads to losses may it be in
terms of economic, time, market share as well as reputation, and in certain extreme cases
may even lead to the downfall of a construction entity.
According to Groton (1997); Mitropoulos and Howell (2001), J.G Richard (2006),
evidence showed that the amount of disputes on construction projects can be reduced
through dispute identification. There are many who believe that conflicts, and therefore
disputes, injured business relationships. Many considered that disputes in the construction
industry are inevitable stated by Cheung and Suen (2002); Stipanowich (1996), J.G
Richard (2006). Thus, it essential that all participants within this very fragmented
industry must consider and establish a proper and effective mechanism to minimise
disputes, to ensure products of total quality and value can be achieved and delivered.
The topic on minimisation construction disputes also dawned from newspaper
articles entitled ‘Precinct 11 Housing Project at a Standstill’,published in The STAR
3
Newspaper dated May 8, 2008. It was about the disputes between the Client, Putrajaya
Holdings Sdn Bhd (PJH) and the Contractor, Peremba Jaya Sdn Bhd. The disputes has
been kept in silence for the last two years. Out of the total of 259 units offered, 211 units
or equivalent to 81.5% has been sold. The project was promised to be delivered to the
buyers in 2005. The bulk of the project was originally given by Peremba Jaya Sdn Bhd to
its subsidiary, Arif Cerah Sdn Bhd who eventually got into financial difficulties in 2005
which causes the project to be stalled. To date Arif Cerah Sdn Bhd has surrendered the
land title back to Putrajaya Holdings to resume the work. As a result, customers who
have purchased the house by signing the sales and purchase agreement as early as 2003
has been servicing their housing loan repayment to the bank are the victims of the
disputes.
Furthermore, in relation to these negative impacts or consequences that disputes
can bear towards the industry, therefore it is vital that participants or ‘the players’ within
this industry adopt a serious attitude towards mastering this subject matter, which in turn
would assists them in planning, decision-making and implementation of construction
projects. This research, will address as much as possible the issues, facts and ideas
regarding the matter of disputes in construction industry and its minimization strategies.
1.3
Aim of Study
The aim of this study is to determine the causes of dispute in the local
construction industry and to identify strategies to mitigate the disputes. To achieve the
above aim, the following objectives have been identified.
4
1.4
Objective of Study
In order to achieve the above aims, following objectives have been laid out:
1) To identify the causes for dispute in the construction industry.
2) To study the effect of disputes in the construction industry
3) To identify ways to mitigate disputes in construction.
1.5
Scope of Research
With respect to the very vast subject regarding disputes in industry, therefore, this
particular work will focus on several types of disputes that are commonly experienced
within the industry.
Subsequently, the consequences arising from these disputes will also be
addressed, and where possible supported with actual case examples.
Next, the study will also put forward the strategies to minimize these disputes,
based on established ideas from various references, journal, articles, working papers and
newspapers.
Finally it should also be noted that all the issues, facts, ideas as well as proposal
that will be presented in this study will only focused on those related to the scenario of
construction industry.
5
1.6
Significance of Research
The subject matter of disputes is an important subject that participants within
construction industry needs to be aware of, and understands as clear as possible, Thus,
this study is presumed to bear the significance of compiling the relevant knowledge
regarding the minimizations of disputes whereas the final product (the completed work as
a literature) may be used as a source of reference for all who are involved in construction
industry or the construction processes to enhance their knowledge on the matter of
disputes together with strategies to minimize it. This would subsequently assists everyone
involved towards a more calculated planning, implementation and decision-making, by
taking into account the potential risks of disputes and ways to resolve it if encountered –
in short; of how to adopt a proper and effective strategies to minimize and resolve
disputes.
1.7
Research Methodology
In order to complete this dissertation, the first and foremost step of the study was
identifying research problem which covered the significance, objective and scope of
study.
Second step is then followed by exploratory research of the literature. Secondary
data sources for literature review are gathered from references books, journals,
newspaper articles and relevant magazines. These sources provide lots of data that can
help to determine the background of the research.
Primary data gathered for this study are taken from interviews conducted with the
expert in this industry. Questionnaires are also distributed among the participants in
construction industry. All the data will analysed using statistical method. Figure 1.1
shows methodology flowchart for this research.
6
Figure 1.1
Methodology Flowchart
7
CHAPTER II
MINIMISING CONSTRUCTION DISPUTES
2.1
Introduction
H.S Richard (2002) stated that the construction industry has become known as
one of the most adversarial and problem-prone, with claims and disputes on construction
projects frequently the rule rather than the exception. Cost overruns and schedule delays
can be the subject of expensive and protracted claims and litigation, and pose serious
risks for all parties to a construction project.
Meanwhile according to J.G Richard et al (2006), for decades, the construction
industry has been mired in adversarial relationships between owners and contractors Each
party’s priorities are unsurprisingly at conflict with the others, establishing a repetitive
cycle of hostilities.
Construction disputes can begin at any phase of the project from program, design,
procurement, during the project, or project close out. The impacts can often have diverse
effects on project financing, budget, schedule, quality, maintenance, safety, and client
satisfaction stated by F.B Osmond (2003).
8
2.2
Definition of Disputes
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.
Dictionary of Law define disputes as a conflict of claims or rights. Whenever one
party to a contract requests something from the other party under the terms of their
contract and that request is not complied with; there is a dispute.
Meanwhile, the words “disputes” has been defined by Kumuraswamy as situation
when a claim or assertion made by one party is rejected by another party and his rejection
is not accepted.
Tillet G (1991) defines that construction dispute as the incompatibility of two (or
more) people’s (or groups’) interests, needs, or goals. As they seek to maximize
fulfillment of their own interests, or needs, or achievement of their own bargaining or
negotiating through compromise, one party may yield to the other on that which is less
important. When this happens, the dispute is usually settled.
To conclude disputes in a simplistic way in principle is that it is an event or
scenario of which either one or both of the party involve in an agreement failed to deliver
the agreed product or outcome.
9
2.3
Nature of Construction Dispute
Murdoch J and Hughes (2000) stated that the first factor defining the nature of a
construction disputes is the term of contract. Basically, a contract is an enforceable
promise. And the subject of this enforceable promise is the production of a unique,
technical artifact, using temporary management system. There are four nature of
construction disputes outline by Murdoch J and Hughes as explained below.
2.3.1
Enforceable Promises
Building contracts, like any other contract, are concerned with making promises,
with the expectation that one can be forced to carry them out. A person who has no
intention of doing a thing should not sign a contract recording that there is no such an
intention.
Of course, it can happen that people enter into contracts that they did not
completely intend. A shared mistake is no real problem, as the parties can rectify it by
mutual consent. However what sometimes happens is that one party claims, due to
oversight or mistake, to have signed a contract that does not accurately reflect his or her
attention. If there is a difference of interpretation, then the type contract will be important
in term of the way in which it will be interpreted. If it is not a standard form of contract,
the principal of ‘contra proferentem’ will prevail. This means that any ambiguity in the
contract will be construed against the party who seeks to benefit by exclutions or
limitations in it. This will usually, although not always, be the party which put it forward.
It is during disagreements about the intentions of contracting parties that such
details as notes of telephone conservations, minutes of meetings, correspondence and the
like may become relevant. These seek to provide evidence to the parties intentions.
However, it will in most cases be too late for the dissenting party to alter the contract.
10
Building contract, as we have seen, are very comprehensive and specific about what is
expected of each party, and it is difficult to claim that the obligations arising from
entering into such a contract were not properly understood at the time it was made.
2.3.2
Technical Matters
Disagreements often arise over technical questions. The technology involved in
construction is idiosyncratic, difficult to understand and subject to change. Added to this
is any change that may be associated with the technology of the client organization. The
use of different and/or familiar techniques is often the causes arguments and
disagreements.
For example, the nature of the site is often source of contention. While the site
itself is clearly visible at ground level, it can hold many surprises once excavation starts.
It is not enough merely to look at a site in order to ascertain the site condition. Adequate
site investigation is a constant source of problem in the industry. Who responsibility is it?
In order to answer that question, one must look at the clauses in the contract. Do they
represent what is intended? Once the cause is identified, it is a fairly straightforward
matter to allocate blame and with it legal responsibility.
2.3.3
Legal Matters
Some disputes are technically simple, and turn on what is the law on a specific
point. The law is not infinite. There many day-to-day occurrences that have not
previously been decided upon by the courts. There are many spheres of activity not
covered by statute. The resolution of a dispute may hinge upon the ascertainment of the
law in a previously undefined area.
11
One particular legal problem area arises from the inconsistencies between various
contracts. A major problem mentioned by Latham (1994) was the inconsistencies and
gaps between the various consultant appointments and the building contract. As a result,
most of the bodies who drafts the contracts now seek to produce integrated packages of
contracts, rater than a standard form for just one of the relationship.
Where a dispute arises under a construction contract, the first means of resolving
that dispute in a binding manner is often through a decision of the contract administrator.
Until recently, a party wishing to pursue a dispute beyond the contract
administrator had two options: either to go to arbitration, if the contract made provision
for this, or to begin proceedings in court.
2.3.4
Entitlement and magnitude
The rough division of disputes into ‘technical’ and legal is often reflected in two
aspects of a claim. The first aspect is that, for any claim to succeed, legal entitlement to
the money must first be proven. After this, the magnitude of the claim must be
established. Entitlement arises from the legal interpretation of the contract and associated
documents. Magnitude then followed as a factual ascertainment of technical data. In
consequences, most disputes contain elements of both types of disputes.
12
2.4
Sources of Disputes
It is important to identify the sources of dispute in order to prevent or minimise
them. According to Cheung et al (2006) the basic factors that drive the development of
disputes are identified; these include:
1) project uncertainty;
2) contractual problems;
3) opportunistic behavior.
Yate (1998) pinpointed that the main types of construction dispute arising from
the contract document include:
1) variations;
2) ambiguities in contract documents;
3) inclement weather;
4) late issue of design information/drawings;
5) delayed possession of site;
6) delay by other contractors employed by the client (e.g. utility companies);
7) postponement of part of the project.
In the study by Kumaraswamy and Yogeswaran (1998) it was indicated that the
sources of construction disputes are mainly related to the contractual matters, including
variation, extension of time, payment, quality of technical specifications, availability of
information, administration and management, unrealistic client expectations, and
determination.
P.M Feniosky et al (2003) stated that the rationale behind the efforts to identify
the sources of disputes in construction has been the premise that if the origins of the
‘illness’ can be identified, ways to ‘cure’ the industry from unnecessary litigation can be
developed. Fenn et al (1997) had summarized seven different research efforts conducted
13
during the past decade and the sources of disputes in construction projects they have
identified which are as listed in the table in the following page:
Table 2.1: Research on the Sources of Conflicts and Disputes in Construction
Industry
Research Author
Sources of Conflicts and Disputes in Construction
Five areas: unrealistic expectations; contract documents;
Bristow 1998
communications; lack of team spirit; and changes
Six areas: payment; performance; delay; negligence; quality; and
Conlin et al.1996
administration.
Seven areas: contract terms; payment; variations; time;
Heath et al. 1994
nomination; renomination and information.
Six areas; change of scope; change conditions; delay; disruption;
Hewit 1991
acceleration; and termination
Ten areas; management; culture; communication; design;
Rhys Jones 1994
economics; tendering pressures; law; unrealistic expectations;
contracts and workmanship
Semple et al. 1996
Four areas; acceleration; access; weather; and changes
Sykes 1996
Two areas; misunderstandings; and unpredictability
[Sources: Fenn et al.1997]
Twenty sources of disputes in Sino-Foreign Joint Venture construction projects
were identified by H.W C Edwin And C.H.S Henry (2005) which include variations;
extension of time; payments; quality of works; technical specification; availability of
information; administration/management; unrealistic client expectations; risk allocation;
project scope definition; poor communication; difference in ways of doing things; lack of
team spirit; previous working relationships; adversarial approach in handling disputes;
unfamiliar with local conditions; conflict of laws; jurisdictional problems; lack of local
legal system; and unclear contractual terms.
14
Hewit (1991) identified six types of construction dispute; change of scope, change
conditions, delay, disruption, acceleration, and termination.
According to M.H Jeffery (2002), disputes occur even though the parties involved
all are well intended. This often happens because someone “drops the ball” by failing to
communicate effectively with another concerning design issues, compensation and
payment issues, scope change issues and the like, leading to legal disputes.
The increase in the number of participants of different cultural background in the
construction value chain means more business interactions and arguments, whether
contractual or social, resulting in an increase in the number of construction disputes
stated by Kumaraswamy and Yogeswaran (1998).
2.4.1
Inconsistencies of Contract
According to C. Keith (1994) some contracts say that certain contract documents
shall govern others if discrepancies are found among them; usually in a declining order as
follows:
1.
Agreement
2.
Supplementary or special conditions
3.
General Conditions
4.
Specifications
5.
Drawings
In this way, some inconsistencies may be removed in advance, but others in the
same document may remain to confound and cause difficulties. If a dispute over a
contractual matter arises, it may be worth looking for contractual inconsistencies that
touch on the matter in question. Inconsistencies often are the cause of disputes since each
party will favor the interpretation that better suits his or her position.
15
The survey done by Sambasivan and Yau (2006) found that the factors of
discrepancies in contract document are one of major contribution to the causes of project
delay in Malaysia which eventually had cause disputes between contractual parties.
According to K.C Iyer et al (2008), the contract language is considered difficult to
comprehend and they are therefore a major source of disputes.
Besides that, lack of understanding in contract clauses is one of source of dispute
(Broom and Hayes, 1997). Lack in clarity of contract clauses has brought lot of
disagreement regarding the contractual obligation to the construction practitioners.
2.4.2
Payment
Murdoch J and Hughes (2000) stated undoubtedly the most important of all the
employer’s express obligations is to pay the contractor the sum of money which forms
the consideration for the contract known as the Contract Sum.
According to Ameer Ali (2005), payment has been referred as the lifeblood of the
construction industry because construction projects involve large capital and take long
time to complete. Meanwile, according to S.Samy Vellu (2006), one of the greatest
problems encountered by the contractors is payment either late payment, non payment or
short payment. The operation of the payment system is not always smooth. This has an
adverse effect on the efficiency and stability of the whole industry. A failure of timely
payment can result in project delay, reduced profitability and also lead the company to
going into liquidation as stated by Ameer Ali (2005).
C. Keith (1994) stated that delayed payments probably will result in extra
financing cost for a contractor. A contractor may suffer other losses, such as
16
uncollectable cash discounts on materials, because delayed payments. Prolonged to
delays in payment cause the even more serious effects of a restricted cash flow such as;
1.
Inability to pay bills
2.
Lowering of credit rating
3.
Discontented staff and workers
4.
Liens on the work
5.
Financial failure
There is no hesitation that, delayed payment or non payment will cause delay to
the progress of Works. As a result, this will also lead to the major construction disputes
between the client and the contractors.
2.4.3
Determination of Contract
Based on PWD Form 203A either party to a contract can terminate or determine
the contract under certain circumstances. According to M.L Don (1991) the usual cause
for determination is default of one party for reasons set down in the conditions of
contract. Other problems experienced when a contract is determine are the area of quality
control, which may suffer, and the question of responsibility for partly completed work is
always in contention.
Bear in mind that, even though there are such provision in condition of contract,
determination of contract should be seen as a last resort as there would cause grievance to
both contractual parties. As a result, both contractual parties will suffer financial losses
and absolutely will also cause delay to the project that lead to construction disputes.
17
2.4.4
Variation
Clearly, buildings are so complex as to require changes to be made before they
are completed. Additionally, it is rare for design to be completely detailed at the time of
tender, a result of this is that changes have to be made in order simply to make the
building work. One possible disadvantage of a variations clause is that it may encourage
the design team to be less than specific at the time of tendering, in terms of what to be
built. The fact that things may be varied as the contract proceeds means that the design
team may not have to finalize their design until a very late stage. This is bad practice and
should be discouraged as far as possible.
K.S Harban Singh (2003) stated the implication of such changes both in terms of
the financial aspects and the legal ramifications can be of material significance; this being
evidenced by the litany of disputes an claims reaching arbitral forums and the corridors of
justice as of recent. To this effect, it can safely said that next to issues pertaining to
payment, disputes or claims related statistic in he engineering and construction industry
exhibit a tendency for variations related matters to be a major source of contention
between the contracting parties.
2.4.5
Lack of Communication
S Murali and W.S Yau (2007) stated since there are many parties involved in a
project (client, consultant, contractor, sub-contractors), the communication between the
parties is very crucial for the success of the project. Proper communication channels
between the various parties must be established during the planning stage. Any problem
18
with communication can lead to severe misunderstanding and therefore, delays in the
execution of the project.
According to M.H Jeffery (2002) a similar dispute may occur when an owners
design vision of a project is not communicated effectively to the design team. Perhaps
due to an owner’s inexperience, this breakdown may result in an unrealistic project
square footage, unnecessary architectural features, and/or finishes that cannot be achieved
within budget.
According to E.G. Frederick and E.J Nancy (2003) any successful relationship,
either personal or professional, relies on good communication between the parties. A
construction team is no different. There are many methods of communication- some
formal, some informal. In formal communications are necessary to keep the job running
smoothly; but if decisions are made or agreements reached, these communications need
to be documented. Formal communication should have an organized method that is
understood and agreed to by all parties. In this way, each person can feed into another’s
system, easily referencing documents as needed.
2.5
Causes of Disputes In General
K.S Harban Singh (2003) had identified that a proliferation of disputes arising
from conflict and claims in recent years. These reasons can be summarized under
following broad categories;
1. Personality clashes between the various parties to the contract and/or member of
project team;
2. Differing goals and objectives of the various parties;
3. A prevailing confrontational/adversarial atmosphere;
19
4. Lack of proper communication between the parties;
5. Allocation of insufficient resources;
6. Complexity of the works under the contract;
7. Allocation of inadequate time for the preparation of contracts and their discharge;
8. Workmanship or quality control problems;
9. Lack of proper planning both in terms of physical work and financial aspects;
10. Lack of good faith on part of the parties;
11. Failure to resolve minor differences on an amicable basis
20
The fish bone diagram below Fig. 2.1 shows causes of disputes in general:
A prevailing
Failure to resolve minor
Personality clashes between
confrontational/adversarial
differences on an amicable
the various parties to the
atmosphere
basis
contract and/or member of
project team;
Lack of proper planning both
Differing goals and objectives
in terms of physical work and
of the various parties;
financial aspects
DISPUTES
Lack of proper
communication
between the parties;
Allocation of
insufficient
resources
Allocation of inadequate
time for the preparation of
contracts and their
discharge;
Complexity of the
works under the
contract
Lack of good faith on
part of the parties
Workmanship or
quality control
problems
21
2.5.1
Causes of disputes by stakeholder
For decades, the construction industry has been mired in adversarial
relationships between owners and contractors as stated by Fenn et al. (1997). Each
party’s priorities are unsurprisingly at conflict with the others, establishing a repetitive
cycle of hostilities. According to Howard et al. (1997), “The owner usually wishes to
obtain maximum quality, functionality, and capacity at minimum cost. The contractor,
while hoping to develop a satisfied client, must in the long run achieve financial goals
that are advanced by expending the minimum resources required to meet a minimum
scope of work”.
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.
Ashworth (2006) stated disputes between parties, are really in no one’s best
interests. Below are some of the main areas where disputes might occur between parties.
22
2.5.1.1 Clients
1. Poor briefing during design stage
2. Changes and variation requirements
3. Changes to standard conditions of contract
4. Interference in the contractual duties of the contract administrator
5. Late payment to contractor
6. Unrealistic expectations of the parties, particularly employers who have
insufficient financing to accomplish their objectives (H.W C Edwin and
C.H.S Henry 2005).
7. Clients fail to pay variation claim (Cheung et al 2007).
8. Failure to respond in timely manner
9. Inadequate tracing mechanisms for request of information
10. Deficient management, supervision and coordination efforts on the part of
the project.
11. Lowest price mentality in engagement of contractors and designers.
12. The absence of team spirit among the participants.
13. Reluctant to check for constructability, clarity and completeness.
14. Failure to appoint a project manager.
15. Discrepancies / ambiguities in contract documents.
23
The fish bone diagram below Fig. 2.2 shows causes of disputes caused by client:
Failure to appoint
a project manager
The absence of
team spirit among
the participants
Interference in the
contractual duties of the
contract administrator
Late payment
to contractor
Reluctant to check for
constructability, clarity
and completeness
Unrealistic expectations of
the parties, particularly
employers who have
insufficient financing to
accomplish their objectives
Clients fail to pay
variation claim
DISPUTES
Failure to respond
in timely manner
Deficient management,
supervision and
coordination efforts on
the part of the project.
Poor briefing during
design stage
Lowest price mentality
in engagement of
contractors and designers
Changes and variation
requirements
Discrepancies /
ambiguities in contract
documents.
Changes to standard
conditions of contract
Inadequate tracing
mechanisms for request of
information
24
2.5.1.2 Consultants
1.
Design inadequacies
2.
Lack of appropriate competence and experience
3.
Unclear delegation of responsibilities
4.
Late issue of design information/drawings (Yates,1998)
5.
Errors/substantial changes in bills of quantities (Cheung et al, 2007)
6.
Variations due to design errors (Cheung et al, 2006)
7.
Design and specification oversights, and errors or omissions resulting from
uncoordinated civil, structural, architectural, mechanical and electrical designs
(M.H Jeffery, 2002).
8.
Failure to understand its responsibilities under the design team contract.
9.
Late information delivery and cumbersome approach to request for
information’s.
10. Incompleteness of drawing and specifications.
25
The fish bone diagram below Fig. 2.3 shows causes of disputes by consultant:
Design inadequacies
Failure to understand its
responsibilities under the
design team contract.
Errors/substantial changes in
bills of quantities
Late information delivery
and cumbersome approach
to request for information’s.
Lack of appropriate
competence and experience
DISPUTES
Variations due to
design errors
Design and specification
oversights, and errors or
omissions resulting from
uncoordinated civil, structural,
architectural, mechanical and
electrical designs
Unclear delegation of
responsibilities
Late issue of design
information/drawings
Incompleteness of
drawing and
specifications.
26
2.5.1.3 Contractors
1. Inadequate site management
2. Poor planning and programming
3. Poor standard of work
4. Delayed payment to subcontractors
5. Fails to proceed works in a competent manner (Cheung et al, 2007).
6. Failure to coordinate its subcontractors’ work through effective and timely
exchange of shop drawings (M.H Jeffery,2002).
7. Lack of understanding and agreement in contract procurement (Carmicheal,
2002).
8. Delay/ suspension of works.
9. Failure to plan and execute the changes of works.
10. Failure to understand and correctly bid or price the works
11. Reluctance to seek clarification.
12. Inadequate CPM scheduling and update requirements
27
The fish bone diagram below Fig. 2.4 shows causes of disputes by contractor:
Delay/ suspension of
works
Poor standard of work
Lack of understanding and
agreement in contract
procurement
Failure to plan and execute
the changes of works
Failure to coordinate its
subcontractors’ work
through effective and timely
exchange of shop drawings
Inadequate site
management
DISPUTES
Reluctance to seek
clarification
Delayed payment
to subcontractors
Failure to understand
and correctly bid or
price the works
Poor planning and
programming
Inadequate CPM scheduling
and update requirements
Fails to proceed works
in a competent manner
28
2.6 Effect of disputes
According to Cheung et al (2002), the effects of construction disputes are
detrimental; if disputes are not properly managed, they may cause project delays,
undermine team spirit, increase project costs, and, above all, damage continuing
business relationships.
Hall (2000) observed that consequences of the construction disputes will not
benefit the stakeholders in the construction project.
Iyer et al (2008) states that with the increasing size and complexity in nature of
projects the conditions of the contracts also tend to become more complicated, which in
turn add to number of disputes to the already existing ones and further delay the
settlement of disputes. The delay in dispute settlement has manifold effects as given
below. It hampers the project progress if dispute arises during execution stage.
1)
It is detrimental to the relationship between owner and contractor.
2)
It contributes to the cost and time overruns.
3)
It sends bad signals to foreign investors thereby slowing down the national
progress.
2.6.1
Effect on Cost and Profitability
S Murali and W.S Yau (2007) stated that factors such as inadequate planning by
the contractors, improper site management by the contractors, inadequate project
handling experience of contractors, and delay in the payments for the work completed
directly affect the completion of the project and cause cost overrun.
One of the major concerns of construction industry participants regarding the
matter of disputes is its effects on the costs or economics of the projects, as well as the
29
financial returns of their effort and investments. The following discuss several key
aspects of the effects of disputes towards project costs and participants profitability.
2.6.1.1 Financial Costs
According to the study conducted by Harmon (2003), nearly all (99 %), of the
major participants in construction industry agreed that disputes occurring during the
course of construction result in additional financial costs. Major concerns were also
noted by these participants regarding the high cost of litigation. Only those who have
not experienced disputes and litigation were not concerned of these costs.
2.6.1.2 Hidden Costs
Apart from the burden of financial costs, the study conducted by Harmon, also
revealed that majority of the industry participants studied recognized that hidden costs
may be incurred if disputes arising during construction are not quickly resolved.
Examples of such costs include the diversion of manpower away from the project (or
even a new project) in order to prepare for a deposition, trial or arbitration; the time it
takes to bring an attorney or consultant up to speed about the project and the dispute; a
reduction in bonding capacity; and damage to reputation. There was also a major
concern by both contractors and owners of construction projects, that unresolved
disputes would hinder their focus on the next or other projects in hand, since available
resources may need to be prepared for any eventualities or outcomes from the disputed
projects.
30
2.6.1.3 Reducing Profit Margin
Disputes can also affect profitability. In today's economy, both the owner and
the contractor seek means to increase the value of their dollar-the contractor by
increasing profits and the owner by controlling costs. When an owner spends money on
adversarial dispute resolution processes, the funds available for rehabilitation, repairs
and new construction are reduced. When the contractor spends money for litigation or
arbitration, the profitability of the job is lessened.
2.6.2
Effect on Time
According to S Murali and W.S Yau (2007), contract-related factors such as
change orders (changes in the deliverables and requirements) and mistakes and
discrepancies in the contract document result in cost overrun. Mistakes and
discrepancies in the contract document can be in scope, deliverables, resources available
and allocated, payment terms, achievement of various milestones, and the project
duration. In most of the instances, time overrun leads to cost overrun.
The effect of disputes on the timing or schedule of construction projects are well
documented as stated by Barry & Michael (1987). In most cases, disputes tend to cause
delays in most construction projects. Delays in turn may result in various other subeffects which included;

Prevention of early completion

Acceleration, which may force additional resources to be contributed

Lost of productivity and efficiency (idled labor and equipment)

Rescheduling and resequencing (due to change work orders, stop work notice,
and others as such)
31

Increase in time-related costs (such as idled equipment rental costs, changes in
building materials price, bank interest, utilities charges, insurance and others as
such)

Third party claims, due to damages for delay to construction projects which
affect them

Abandonment of project by contractors and termination of contract. Whenever
there are delays, there are disputes as to who should bear the responsibility and
the cost. These disputes often lead to an arbitration process by third parties and
failure in this process leads to litigation where the disputes are settled by the
court. In extreme cases, some projects might be totally abandoned. About 17%
of the projects in Malaysia are abandoned (MALBEX, 2005).
2.6.3
Effect on Quality
According to Okumbe (2007), quality is defined as “fitness to purpose”, an i.e.
delivering product (buildings or physical structures) which gives an appropriate service
for which it is intended. The quality of products or services refers to the perception of
the degree to which the product or service meets the customers’ expectations
(manifested through contract agreement). Quality therefore bears no specific meaning
(perceptual, conditional and somewhat subjective attribute) unless related to specific
function and/or objects; costs, time, functionality, appearance, aesthetics and others as
such. For that matter, any kind of disputes which affects any of these attributes may
affects the quality of product to be delivered.
2.6.4
Effect on business and working relationship
Cheung et al (2002) stated a continuing relationship is one of the key elements
for any organization to strive for. A good relationship is always based on trust, common
interests, and respect and requires the effort and commitment of the parties to make it
last.
32
As pointed out by Harmon in his work, the effect of disputes on business and
working relationship is generally deconstructive in nature. Nearly all participants
studied agreed that conflicts adversely affect the parties’ working relationship, whereby;
relationship are strained at best; communications limited; and all parties’ involved
became suspicious with one another. These, if not properly managed and resolved, will
foster hard feelings and may turn into an ‘ugly’ all out war between these parties’ and
severe business relationship in a long run.
Findings from Harmon’s work also agreed that unresolved disputes are
counterproductive to the progress of construction and can bog down a project. A dispute
creates a lot of lingering problems beyond the dispute itself for the completion of the
project. It kind of sours the relationship among the people, it also makes it more
difficult to resolve other problems that come up during the course of the project, and it's
divisive and both [parties] are worrying about the fight they are in rather than getting
the job done.
2.6.5
Dispute Escalation (Chain Reaction)
A dispute may give rise to another or more other disputes. As studied by
Harmon, nearly all the participants of construction industry agreed that when disputes
are not resolved, they escalate and become protracted and may turn into an all out
conflict and become the breeding base for subsequent disputes (especially on projects
that involved a lot of parties with varying contributions and varying contracts or
subcontracts).
33
2.6.6
Emotional Costs
Majority of the participants of construction industry as studied by Harmon also
acknowledged that unresolved disputes result in job stress. Conflict is stressful and
physically and psychologically draining. The emotional cost can be substantial. People
can become so emotionally involved in the dispute rather than focusing in on it. It
creates a real personal problem with the people in dealing with it. Relationships start to
deteriorate; people around the jobs see that, know there's a problem. It impacts them and
their progress. And it can be devastating to a job.
34
Effect of
Disputes
Financial
Costs
Cost and
Profitability
Time
Hidden Costs
Reducing
Profit Margin
Quality
Business and
working
relationship
Figure 2.5 : Effect of Construction Disputes
Dispute
Escalation
(Chain
Reaction)
Emotional
Costs
35
2.7 Avoiding Disputes
Pro-active steps need to be taken by the three (i.e., the owner, design engineer/
construction manager, and contractor) to foster a cooperative attitude among the parties
toward the avoidance of disputes.
According to Groton (1998), the parties to construction project implement loss
prevention and dispute avoidance measures in their own business practices, adopt
partnering to promote teamwork, and agree upon dispute resolution procedures for the
project.
2.7.1
Partnering approach
Cheung et al (2006) stated that the central ideal of partnering is to reduce the
adversarial relationship between two parties and to encourage them to work in a
cooperative manner. By being open and honest with each other, it is anticipated that the
chance of conflict is greatly reduced, resulting in less dispute. Partnering also helps the
parties to establish a long term working relationship.
According to Richard (2003), partnering is usually achieved by a contract
specification that requires the parties to the agreement to observe the fundamental
obligations of good faith and fair dealing with each other during the project. Before
actual work begins on the project, an independent facilitator conducts a retreat for the
parties. This retreat serves three fundamental purposes: (1) to define leadership and
management responsibilities; (2) to establish non adversarial methods to identify
potential problems and resolve them before they materialize stated by Groton (1998) and
(3) to nurture long term relationships built upon reciprocity and trust. As such, partnering
36
reduces future conflict and related expense, enhances project communications, and
maintains relationships stated by TJ Stipanowich (1998).
As stated in Building (1998), partnering also focuses on dispute avoidance and
prevention but, in contrast to a firm-based loss-prevention program, partnering
establishes the project protocols for party interaction, problem recognition and solution,
and dispute resolution. According to ASFE (1995), when the parties do not adopt a
formal partnering agreement, they can apply the loss prevention skills and techniques
they use in their own firms to project management function.
2.7.2
Clarification of responsibilities
Each party in construction needs to be clear about their tasks and responsibilities.
It is important to spell out roles and responsibilities at the beginning of the contract
because often parties to the contract are unaware of their rights and responsibilities until
problems develop. M.Don (1991) had listed out each stakeholder responsibilities in
general:
2.7.2.1 Client
Client responsibilities include:
1.
Responsible for providing all information necessary to maintain the
buildings works in accordance with the approved programme
2.
Responsible for the accuracy of all information contained in the agreement
relating to the site and warrant the site in some instances
3.
Only vary the contract under the conditions set down in the contract
4.
Pay the contractor the contract sum as stated in the contract
5.
Responsible under the contract for actions of his agent
37
2.7.2.2 Contractor
Below are some of the lists of contractor responsibilities:
1. Execute the whole of the works set out in the contract
2. Carry out work in an efficient and professional manner
3. Maintain the approved work programme
4. Execute properly documented variations to the contract
5. Maintain the site in good order and condition and allow access to approved
persons
6. Carry out instruction given in writing b authorized persons
7. Carry out work in accordance with local regulations
8. Deliver up the whole of the works on completion, allow the owner to occupy,
maintain the works for that period if so specified, and be responsible for
defects for a nominated period.
2.7.2.3 Consultant
Consultants responsibilities include:
1. Carry out obligations under the terms conditions of respective contracts
2. Prepare designs, contract documents and cost estimates for their specialist
functions and co-ordinate with design team
3. be responsible for all aspects of such documents
4. Recommend contractors for specialist trades to act as nominated
subcontractors
5. Arrange the testing and hand-over of relevant sections of the work on
completion
6. Carry out responsibilities and render the defects liability provisions as they
apply to their particular section
7. Assist with post-contract evaluations as required.
38
2.7.3
Risk Allocation
Project risk can be defined as an uncertain event or condition that, if it occurs, has
a positive or negative effect on at least one project objective, such as time, cost, scope, or
quality.
M.L Don (1991) recommended that the term “obligations’ should replace the
“risks”. He also suggested that there is necessity for clear identification of risk areas and
he promoted risk allocation model to determine obligations.
MJ Termini (1999) stated that one of the major steps in project risk management
is to identify and assess the potential risks in the project. Every project contains some
degree of risk; and yet, most project managers are ill prepared when it comes to
identifying or adequately addressing potential risks. Meanwhile according to PMI (2004)
be successful, the organization should be committed to addressing the management of
risk proactively and consistently throughout the project.
Risk is manageable, diminishable, transferable or acceptable but not ignorable as
stated by M Latham (1994). As a part of a risk management strategy, it is commonly
defined through the contractual documents. Usually, a tender document of a construction
project is prepared by the contracting party, i.e. the owner, who initiates the project. It is
common that the owner tends to contractually pass the responsibility for most of the risks
to the contractor under traditional procurement processes stated by JA Rutgers and HD
Haley (1996).
According to M.E Sameh (2007) project risks are divided into two groups,
according to their source, into internal and external. Internal risks are those that are
project related and usually fall under the control of the project management team.
External risks are those risks that are beyond the control of the project management team.
A .Aleshin (2001) stated that ‘‘internal risks are initiated inside the project while external
risks originate due to the project environment’’. Internal risks are then divided according
39
to the party who might be the originator of risk events such as owner, designer,
contractor, etc. External risks are those initiated at the macro level.
2.7.4
Increase ability to resolve problems
M. Panagiotis and H. Gregory (2001) suggested to resolve problems with low
solution and disruption costs, in addition to cooperative behavior, the project team must
establish effective problem-solving mechanisms. This requires:
(1) problem-solving and negotiation skills, and
(2) processes and policies to promote fast decision making at the project level,
and fast escalation of issues that cannot be resolved on site.
When uncertainty is high, a significant investment in such mechanisms may be
needed. The development of skills, processes, and relations require significant effort and
investment at the beginning of the project, because changes in attitudes and beliefs and
learning of new skills and processes are necessary for successful cooperation.
40
Partnering
approach
Clarification
of
responsibilities
Disputes
Minimisation
Increase
ability to
resolve
problems
Figure 2.6 : Disputes Minimisation
Risk
Allocation
41
CHAPTER III
RESEARCH METHODOLOGY
3.1
Introduction
In order to achieve the aim as well as the objectives as outlined earlier in this
research, therefore the standard and commonly used research process had been employed.
The major step or stages as well as the binding activities within this process from start
until completion are discussed further in the following sections. The flowchart diagram
(Figure. 1.1) illustrating the process of the research methodology to be used to carry out
the study.
3.2
Literature Review
This section discuss elaborately on previous work done by others in relation to the
subject matter of this particular research. Apart from that, general or established facts
which are relevant to this field of study will also be reviewed and presented. Information
related to the problem were gathered from reliable sources such as from the internets
articles published by relevant and chartered establishment; recent journals both print and
digital; working papers and proceedings; court cases; relevant reference books and
newspaper articles.
42
3.3
Data & Information Gathering
Relevant data and information are gathered to establish links between various
subject matter of this research. Apart from that, these data and information would also be
applied where possible, in strengthening the facts that were reviewed in the literature or
between various literatures.
In general, the data that are gathered for this research comprised of both primary
and secondary data and information.
3.3.1
Primary Data and Information
Two types of primary data and information are gathered for this research. The
first of these is obtained through the use of questionnaires, whilst the second is through
interviews. These data and information are used to relate real-time experience of
respondents with respect to the facts, ideas and statements presented in various
literatures, regarding the subject matter of this research.
3.3.1.1 Questionnaires
Questionnaires are used to extract as much as possible relevant data and
information from predetermined respondents. In general the content of this questionnaire
are based on matters that are relevant for this research. Questionnaires were distributed in
the state of Kuala Lumpur, Selangor and Klang Valley area. This is due to the fact that
most projects are awarded to industry participants that are located or operates within
these locations as stated by M. Alias et al. (2007). Sample selection is non-random, thus
samples are selected from core participants of construction industry; contractors, clients
and consultants.
43
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 second part of the questionnaire was focusing on the effects of the disputes to
organisation in the construction industry. This part of questionnaire would enhance the
researcher in identifying the side effects of construction disputes in the industry at large.
The final part of the questionnaire was on avoiding construction disputes. This
would help in minimising construction disputes in the future and identify the best method
to avoid construction disputes.
3.3.1.1.1 Method of Questionnaire Collection
A postal questionnaire is considered to be the appropriate method for the analysis
survey. The postal questionnaire is selected in view of its clear advantages over other
method such as interview that will take longer time to achieve the same size of sample.
By using the postal survey, a wider geographical coverage is possible. Moreover, due to
time and financial factors,
postal questionnaire is the most suitable method to collect
the data.
Moreover, due to time and financial factors, postal questionnaire is the most
suitable method to collect the data.
44
3.3.2
Secondary Data and Information
Secondary data and information were used to strengthen certain facts, ideas,
figures and statements of primary interest within the scope of this research. Apart from
that, secondary resources also had been used to compare, discuss and relate certain
findings from the survey conducted through the questionnaires and interviews.
The sources of these secondary data and information were various; include the
data/information extracts from reference books; relevant journals/working papers, public
records and relevant cases or court records such as judgment notes, appeal notes, and
others as such.
3.4
Data Analysis and Interpretation
After the compilation of responses, all types of data received under different
questions had been separated and gathered to answer different research objectives. The
data were categorized under different variables to represent the result of the research
objectives. Analysis of data according to different objectives was done by using different
statistical methods such as frequency analysis and average index analysis.
3.4.1
Frequency Analysis
Frequency analysis used a tabular form to represent the result of data analysis of
frequency of response that respondents gave to the different variables in the
questionnaire. The result was tabulated in the form of frequency number and percentages
according to total respondents. For graphic result presentation, bar chart and pie chart are
used as summaries.
45
3.4.2
Average Index Analysis
The result of the data collected will be further summarized by using average index
analysis. The average index analysis for each variable was calculated by using the similar
classification of the rating scale proposed by Abd. Majid (1997) and Likert Scaling as
follows:
Average Index = Σ ai.xi
Σ xi
“Not Important”
1.00 < Average Index (I) < 1.50
“Less Important”
1.50 ≤ Average Index (I) < 2.50
“Moderately Important”
2.50 ≤ Average Index (I) < 3.50
“Very Important”
3.50 ≤ Average Index (I) < 4.50
“Extremely Important”
4.50 ≤ Average Index (I) < 5.00
Average Index
1.00 < Average Index (I) < 1.50
1.50 ≤ Average Index (I) < 2.50
2.50 ≤ Average Index (I) < 3.50
3.50 ≤ Average Index (I) < 4.50
4.50 ≤ Average Index (I) < 5.00
3.5
Rating Scale
Insignificant
Less Significant
Moderately Significant
Significant
Very Significant
Conclusions and Recommendations
Based on the results obtained, conclusions and recommendations were developed.
Conclusions are drawn based on the findings and analysis of the results from the
questionnaire survey in accordance with the research objectives. Specific and practical
recommendations were later suggested on factors on how to manage construction
disputes for the better performance of the industry in future. Recommendations are also
46
made available to aide for future researches. The next chapter renders the detailed
information on the above mentioned statement.
47
CHAPTER IV
DATA COLLECTION AND ANALYSIS
4.1
Introduction
In this chapter, a detail analysis of data and result will be shown and elaborated by
using Frequency Analysis and Average Analysis. 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 and had been categorized into 4 sections as listed below.
a) Analyzed the data collected from clients
b) Analyzed the data collected from consultants.
c) Analyzed the data collected from contractors.
d) Analyzed the data collected from all respondents (Overall).
48
4.2
Questionnaire Feedback
There were eighty set of questionnaires distributed to construction participants
included clients, consultants and contractor which had been selected randomly within
Wilayah Persekutuan Kuala Lumpur, Shah Alam and Klang Valley areas. Out of the total
80 questionnaires, 40 questionnaires were returned with 5 incomplete responses. The
remaining 40 questionnaires were unreturned by the respondents.
Table 4.1: Response Percentage
Number of
Questionnaires
%
questionnaires
Returned
i)
Complete responses
35
43.7
5
6.3
Unreturned
40
50.0
Total Distributed
80
ii) Incomplete responses
Figure 4.1: Distribution Percentage of Questionnaire Sampling
Distribution of Questionnaire Sampling
44%
Completed
Questionnaire
Incomplete
Questionnaire
50%
Unreturned
6%
49
The analysis on the questionnaire responses will be done by using the 35
complete responses returned by the respondents. A majority of the questionnaires were
returned by the contractors (42.9%), 37% were returned by the consultant and the
remaining 7 questionnaires (20%) were gathered from the clients.
Table 4.2: The Percentage of Respondent Based on Organisation
Stakeholders
Number of
%
questionnaires
Contractor
15
42.9
Consultant
13
37.1
Client
7
20.0
Figure 4.2: Distribution of Stakeholders Percentage
Distribution of Stakeholders
20%
43%
Contractor
Consultant
Client
37%
The table 4.3 displays the characteristic of the stakeholders in terms of years of
working experience. Most of the respondents from all three categories of stakeholders
were having more than 10 years of working experience. 9 questionnaires were gathered
from contractor with more than 10 years experience, 4 contractors with 5 to 10 years
experience and only 2 contractors with less than 5 years experience. Whereas for
50
consultant’s profile, 5 consultants are having more than 10 years experience, and both 5
to 10 years and less than 5 years experience having 4 respondents each. 3 respondents
from client were having more than 10 years working experience and 3 respondents from
5 to 10 years experience category. Whereas only one respondent from the client profile is
having less than 5 years experience.
Table 4.3: Tabulation of Respondents’ Years of Working Experience
Years of working experience
Stakeholders
Less than 5
5 – 10
More than 10
Contractor
2
4
9
Consultant
4
4
5
Client
1
3
3
Total respondents
7
11
17
Figure 4.3: Respondents’ Years of Working Experience
No. of respondents
Years of Working Experience
10
9
8
7
6
5
4
3
2
1
0
Contractor
Consultant
Client
Less than 5
5 – 10
Years
More than 10
51
4.3
Analysis and Results
4.3.1
Causes of Construction Disputes in General
This section presents first stage of analysis to evaluate and determine the most
significant causes of construction dispute in general. There are a total of 11 factors
identified as causes of construction disputes in general. These factors are normalized and
non bias to any profile of the respondents.
The factors will be viewed from four different view point namely client,
contractor, consultant and overall point of view. It is important to appreciate the
responses gathered from various stakeholders’ perspective as their way of looking at the
problem at hand may differ from one another. The significance of each factors in
contributing as a cause of disputes in general is ranked based on the average index value.
The average index was used to grade the weight of each factor on how much it affected
the industry or rather how much it had contributed to the problem.
i)
Client’s Point of View
There are seven respondents for the questionnaire pooled within the client’s
profile. Table 4.4 shows the responses of clients on the causes of disputes in general.
Table 4.4: Client’s point of view
Frequency
No.
Statement
1.
Lack of proper communication
between the parties
Workmanship or quality
control problems.
Lack of proper planning both in
2.
3.
1
2
3
4
5
Average
Index
Rank
0
0
0
2
5
4.714
1
0
0
0
3
4
4.571
2
0
0
1
2
4
4.429
3
52
4.
5.
6.
7.
8.
9.
10.
11.
terms of physical work and
financial aspects
Differing goals and objectives of
the various parties
Complexity of the Works under
the contract
Allocation of inadequate time for
the preparation of contracts and
their discharge
Personality clashes between the
various parties to the contract
and/or member of project team
Failure to resolve minor
differences on an amicable basis
Lack of good faith on part of the
parties
Allocation of insufficient
resources
A prevailing confrontational/
adversarial atmosphere
0
0
1
3
3
4.286
4
0
0
3
2
2
3.857
5
0
1
1
4
1
3.714
6
1
0
1
4
1
3.571
7
0
1
3
2
1
3.429
8
0
1
4
0
2
3.429
8
0
2
3
2
0
3.000
10
0
2
4
1
0
2.857
11
The results from Table 4.4 above shows that clients relates two factors as very
significant to the causes of construction disputes in general as the average index value
exceeds 4.500 level. The first factor is lack of proper communication between parties
which scores 4.714 on its average index value. Undeniably, communication breakdown
between parties involved in the construction industry may always be regarded as the
impetus to construction disputes. The second factor that is considered as very significant
is workmanship or quality control problems (average index: 4.571).
This is subsequently followed by five factors rated as significant to causes of
disputes in general as the average index falls between 4.500 and 3.500 level. These
factors are listed based on the significance level as follows:

Lack of proper planning both in terms of physical work and financial aspects

Differing goals and objectives of the various parties

Complexity of the Works under the contract
53

Allocation of inadequate time for the preparation of contracts and their discharge

Personality clashes between the various parties to the contract and/or member of
project team
It is then tailed by four factors which are observed as moderately significant and less
significant to the subject matter. These factors are namely failure to resolve minor
differences on an amicable basis, lack of good faith on part of the parties, allocation of
insufficient resources and prevailing confrontational/adversarial atmosphere.
ii)
Consultant’s Point of View
Results from the questionnaires gathered from consultant’s point of view are
tabled in the following Table 4.5. Total of 13 respondents from consultant profile
responds to the questionnaires.
Table 4.5: Consultant’s point of view
Frequency
No.
Statement
1.
Lack of proper planning both
in terms of physical work and
financial aspects
Lack of proper communication
between the parties
Workmanship or quality control
problems.
Complexity of the Works under
the contract
A prevailing confrontational/
adversarial atmosphere
Differing goals and objectives of
the various parties
Allocation of insufficient
resources
2.
3.
4.
5.
6.
7.
1
2
3
4
5
Average
Index
0
0
0
5
8
4.615
1
0
0
2
2
9
4.538
2
0
0
1
5
7
4.462
0
0
2
7
4
4.154
4
0
0
4
3
6
4.154
4
0
0
5
6
2
3.769
6
0
1
4
5
3
3.769
6
Rank
3
54
Allocation of inadequate time for
the preparation of contracts and
their discharge
Failure to resolve minor
differences on an amicable basis
Lack of good faith on part of the
parties
Personality clashes between the
various parties to the contract
and/or member of project team
8.
9.
10.
11.
1
2
3
5
2
3.385
8
0
4
4
2
3
3.308
9
0
3
8
2
0
2.923
10
2
3
4
3
1
2.846
11
Table 4.5 illustrates the result from the questionnaire answered by the consultant.
These results relay the responses from consultant’s perspective on the causes of disputes
in general. Based on the consultant’s point of view out of 11 factors listed, two factors
recorded average index value more than 4.500 level which is considered as very
significant. Both factors are related to communication issue in the construction industry.
These factors are:

Lack of proper planning both in terms of physical work and financial aspects

Lack of proper communication between the parties
This is then followed by five other factors with average index value lies between
3.500 to 4.500. Being within this range, these factors are regarded by consultant as
significant to the causes of disputes in general. The significant factors are listed as
follows;

Workmanship or quality control problems.

Complexity of the works under the contract

A prevailing confrontational/ adversarial atmosphere

Differing goals and objectives of the various parties

Allocation of insufficient resources
55
iii)
Contractor’s Point of View
Majority of the respondents to the questionnaires are from contractor profile. The
view point from 15 contractors concerning causes of disputes in general are gathered and
tabulated in the following table.
Table 4.6: Contractor’s point of view
Frequency
No
Statement
1.
Lack of proper communication
between the parties
Complexity of the Works under
the contract
Lack of proper planning both in
terms of physical work and
financial aspects
Differing goals and objectives of
the various parties
Allocation of inadequate time for
the preparation of contracts and
their discharge
A prevailing confrontational/
adversarial atmosphere
Allocation of insufficient
resources
Workmanship or quality control
problems.
Failure to resolve minor
differences on an amicable basis
Personality clashes between the
various parties to the contract
and/or member of project team
Lack of good faith on part of the
parties
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
1
2
3
4
5
Average
Index
0
0
1
6
8
4.467
0
0
1
6
8
4.467
0
0
2
6
7
4.333
0
0
6
4
5
3.933
0
2
3
7
3
3.733
5
0
0
9
3
3
3.600
6
1
2
3
6
3
3.533
7
0
3
5
5
2
3.400
8
1
2
6
2
4
3.400
8
2
3
5
3
2
3.000
10
2
4
7
2
0
2.600
11
Rank
1
1
3
4
Results shown in Table 4.6 above illustrate the reactions from the contractor’s
point of view on the causes of construction disputes in general. It is worth to note that
contractors did not rate any factors as very significant as a cause of construction disputes.
56
However, seven factors with the average index value between 3.500 and 4.500 level are
observed to be significant to the cause of construction disputes in general from the
contractor’s standpoint. These factors are listed as follows according to the level of
significance;

Lack of proper communication between the parties

Complexity of the Works under the contract

Lack of proper planning both in terms of physical work and financial aspects

Differing goals and objectives of the various parties

Allocation of inadequate time for the preparation of contracts and their discharge

A prevailing confrontational/ adversarial atmosphere

Allocation of insufficient resources
iv)
Overall Respondents
Table 4.7: Overall Respondents
Frequency
No.
Statement
1.
Lack of proper communication
between the parties
Lack of proper planning both in
terms of physical work and
financial aspects
Complexity of the Works under
the contract
Workmanship or quality control
problems.
Differing goals and objectives of
the various parties
A prevailing confrontational/
adversarial atmosphere
Allocation of inadequate time for
the preparation of contracts and
their discharge
2.
3.
4.
5.
6.
7.
1
2
3
4
5
Average
Index
5
6
10
10
4
4.543
1
0
0
3
13
19
4.457
2
0
0
6
15
14
4.229
3
0
3
6
13
13
4.029
4
0
0
12
13
10
3.943
5
0
2
17
7
9
3.657
6
1
5
7
16
6
3.600
7
Rank
57
8.
9.
10.
11.
Allocation of insufficient
resources
Failure to resolve minor
differences on an amicable basis
Personality clashes between the
various parties to the contract
and/or member of project team
Lack of good faith on part of the
parties
1
5
10
13
6
3.514
8
1
7
13
6
8
3.371
9
5
6
10
10
4
3.057
10
2
8
19
4
2
2.886
11
Causes of construction disputes analyzed from the cumulative view from client,
consultant, and contractors are shown in the Table 4.7 above. Based on the result, it is
observed that all stakeholders agreed that communication is the major and the single most
important factor that can lead to construction disputes. As show in table above, only one
factor records an average index value of exceeding 4.500 level. Lack of proper
communication between parties is considered as very significant as a cause of dispute in
general as it scores 4.534 in average index value.
This is then subsequently followed by the factors regarded as significant with
average index value ranges between 3.500 to 4.500 level. There are seven factors
classified as significant in contributing to causes of construction in general. These factors
are listed as below according to the level of significance.

Lack of proper planning both in terms of physical work and financial aspects

Complexity of the Works under the contract

Workmanship or quality control problems.

Differing goals and objectives of the various parties

A prevailing confrontational/ adversarial atmosphere

Allocation of inadequate time for the preparation of contracts and their discharge

Allocation of insufficient resources
On the other hand, the results show that three factors resulted as moderately
significant to the problem at hand. These factors are having average index value in
between 2.500 to 3.500. The factors listed below are rather of individualism and human
58
relation in nature and not directly related to the construction work nature. We have to
accept the fact that individual involved in construction projects are having different
personality and preferences in decision making. Listed below are three factors which are
regarded as moderately significant to the cause of construction disputed in general.

Failure to resolve minor differences on an amicable basis

Personality clashes between the various parties to the contract and/or member of
project team

4.3.2
Lack of good faith on part of the parties
Causes of Construction Disputes by Client
This section discusses the analysis of the questionnaire concerning the causes of
construction disputes by client. In order to gather a comprehensive feedback from the
stakeholders, feedbacks from each stakeholder profile namely clients, consultants and
contractors need to be analyzed.
The analysis will focus on the factors that are very significant (average index of
exceeding 4.500) and factors that are significant (average index between 3.500 to 4.500).
Nonetheless, factors scoring average index lower than 3.500 level is regarded as
moderately significant, less significant and very insignificant. These factors too need to
be addressed because one way or another, these factors are a legitimate factors
contributing to construction disputes. There are a total of 15 factors identified as causes
of construction disputes by clients. The significance of each factors in contributing as a
cause of disputes by clients are ranked based on the average index value. The average
index was used to determine how much it affected the industry or rather how much it had
contributed to the problem.
59
i)
Client’s Point of View
There are seven numbers of respondents attempted all the questions. The results
are illustrated as in the Table 4.8 below.
Table 4.8: Client’s point of view
Frequency
No.
Statement
1.
Late payment to contractor
2.
Changes and variation
requirements
Poor briefing during design stage
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Failure to respond in timely
manner.
Lowest price mentality in
engagement of contractors and
designers.
Unrealistic expectations
particularly employers who have
insufficient financing to
accomplish their objectives
Fail to pay variation claim
Discrepancies / ambiguities in
contract documents
Failure to appoint a project
manager
The absence of team spirit
among the participants
Interference in the contractual
duties of the contract
administrator
Deficient management,
supervision and coordination
efforts on the part of the project
Changes to standard conditions
of contract
Inadequate tracing mechanisms
for request of information
1
2
3
4
5
Average
Index
0
0
0
2
5
4.714
1
0
0
0
3
4
4.571
2
0
0
1
3
3
4.286
3
0
0
1
3
3
4.286
3
0
0
1
4
2
4.143
5
0
0
3
2
2
3.857
6
0
0
4
1
2
3.714
7
0
2
1
2
2
3.571
8
0
2
1
3
1
3.429
9
0
1
2
4
0
3.429
9
0
1
3
3
0
3.286
11
0
2
2
2
1
3.286
11
0
2
2
3
0
3.143
13
0
3
1
2
1
3.143
13
Rank
60
15.
Reluctant to check for
constructability, clarity and
completeness
1
1
2
3
0
3.000
15
Clients are always regarded as the top hierarchy in the construction industry.
Hence, client always try to avoid as being the culprit or cause of disputes in construction.
Two factors which their average index value is above 4.500 level are considered as very
significant to the problem at hand. These factors are late payment to contractor (average
index : 4.714) and changes and variation requirement (average index : 4.571).
Furthermore, based on the average index analysis, the respondents agree that eight factors
are significant to the cause of disputes by clients. The average index value ranges
between 3.500 and 4.500 level thus pooled as significant. Looking from the client’s
perspective, the top eight significant causes of disputes by client are listed as follows
based on their level of significance:

Late payment to contractor

Changes and variation requirement

Poor briefing during design stage

Failure to respond in timely manner

Lowest price mentality in engagement of contractors and designers.

Unrealistic expectations particularly employers who have insufficient financing to
accomplish their objectives
ii)

Fail to pay variation claim

Discrepancies / ambiguities in contract documents
Consultant’s Point of View
The total of 13 respondents from the consultant profile responds to the
questionnaire. Table 4.9 below indicates the results of consultant’s point of view on the
causes of disputes by clients.
61
Table 4.9: Consultant’s point of view
Frequency
No.
1.
Statement
2.
Changes and variation
requirements
Late payment to contractor
3.
Poor briefing during design stage
4.
Unrealistic expectations
particularly employers who have
insufficient financing to
accomplish their objectives
Lowest price mentality in
engagement of contractors and
designers.
Discrepancies / ambiguities in
contract documents
Deficient management,
supervision and coordination
efforts on the part of the project
Inadequate tracing mechanisms
for request of information
Fail to pay variation claim
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Failure to respond in timely
manner.
The absence of team spirit
among the participants
Interference in the contractual
duties of the contract
administrator
Changes to standard conditions
of contract
Reluctant to check for
constructability, clarity and
completeness
Failure to appoint a project
manager
1
2
3
4
5
Average
Index
0
0
0
6
7
4.538
1
0
0
1
5
7
4.462
2
0
0
1
6
6
4.385
3
0
0
3
6
4
4.077
4
0
0
5
5
3
3.846
5
2
0
5
3
3
3.385
6
0
3
4
6
0
3.231
7
2
0
5
5
1
3.231
7
2
2
4
2
3
3.154
9
2
1
5
3
2
3.154
9
2
2
4
4
1
3.000
11
2
2
6
2
1
2.846
12
2
2
6
3
0
2.769
13
3
3
2
5
0
2.692
14
5
3
2
3
0
2.231
15
Rank
From the results shown in the table above, it is observed that the result ranges
from 4.538 for the highest average index down to 2.231 for the lowest average index.
Though the results show wide variation, nevertheless all factors remain as the root cause
62
of construction disputes. Consultants regard changes and variation requirement (average
index : 4.538) as a very significant factor as being the cause of disputes by clients. Focus
should be given to the factor with average value of exceeding 4.500. However, from the
responses, majority of the consultants agree with the five common factors as cause of
disputes by the clients. Five factors are listed as significant as the average index lies
between 3.500 and 4.500. These factors are shown below in their order of significance:

Changes and variation requirement.

Late payment to contractor

Poor briefing during design stage

Unrealistic expectation particularly employers who have insufficient financing to
accomplish their objectives

iii)
Lowest price mentality in engagement of contractors and designers
Contractor’s Point of View
Table 4.10 shows the results based on 15 respondents from contractor profile on
the causes of disputes caused by the clients.
Table 4.10: Contractor’s point of view
Frequency
No.
Statement
1.
Late payment to contractor
2.
Changes and variation
requirements
Poor briefing during design stage
3.
4.
5.
Lowest price mentality in
engagement of contractors and
designers.
Unrealistic expectations
particularly employers who have
insufficient financing to
1
2
3
4
5
Average
Index
Rank
0
0
0
5
10
4.667
1
0
0
0
7
8
4.533
2
0
0
4
6
5
4.067
3
0
0
5
5
5
4.000
4
0
2
5
5
3
3.600
5
63
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
accomplish their objectives
Fail to pay variation claim
Deficient management,
supervision and coordination
efforts on the part of the project
Inadequate tracing mechanisms
for request of information
Reluctant to check for
constructability, clarity and
completeness
Failure to respond in timely
manner.
Discrepancies / ambiguities in
contract documents
Interference in the contractual
duties of the contract
administrator
Changes to standard conditions
of contract
The absence of team spirit
among the participants
Failure to appoint a project
manager
1
3
3
5
3
3.400
6
1
2
9
2
1
3.000
7
2
3
5
3
2
3.000
7
2
2
5
6
0
3.000
7
2
4
3
5
1
2.933
10
3
2
5
4
1
2.867
11
1
6
3
4
1
2.867
11
0
8
5
2
0
2.600
13
3
4
5
2
1
2.600
13
4
5
4
1
1
2.333
15
Table 4.10 shows the detail distribution of results from contractor’s point of view
on the cause of disputes by clients. The average index resulted within the range of 4.667
down to 2.333. It is observed that two factors are regarded as very significant. Both late
payment to contractor with average index of 4.667 and changes and variation requirement
with average index of 4.553 are very significant as the cause of construction disputes by
client from contractor’s view point. Total of five factors score average index value
exceeding 3.500 level and considered as significant. The top five factors listed based on
their rank are as follows:

Late payment to contractor

Changes and variation requirement

Poor briefing during design stage

Lowest price mentality in engagement of contractors and designers
64

Unrealistic expectations particularly employers who have insufficient financing to
accomplish their objectives.
It is interesting to note that both contractor and consultant agreed and shared the
view on the significant factors contributing to disputes caused by clients. The five
significant factors listed by contractors are observed to be tally with the preceding result
listed by consultant.
iv)
Overall Respondents
The overall response on causes of construction disputes by client ranges from
very significant to less significance to the problem at hand. This is shown in their average
index ranging from 4.600 to 2.514. Inevitably respondents viewed the problem at hand
from different view based on their preference and profile. Client observed the matters
differently as compared to consultants and the same applies with contractors. This entails
that factors affecting different profile in construction industry differs from one another. It
also depends on how much that particular factor is affecting that particular profile be it
client, consultant or contractor.
Table 4.11: Overall Respondents
Frequency
No.
Statement
1.
Late payment to contractor
2.
Changes and variation
requirements
Poor briefing during design stage
3.
4.
5.
Lowest price mentality in
engagement of contractors and
designers.
Unrealistic expectations
particularly employers who have
insufficient financing to
1
2
3
4
5
Average
Index
Rank
0
0
1
12
22
4.600
1
0
0
0
16
19
4.543
2
0
0
6
15
14
4.229
3
0
0
11
14
10
3.971
4
0
2
11
13
9
3.829
5
65
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
accomplish their objectives
Fail to pay variation claim
Failure to respond in timely
manner.
Discrepancies / ambiguities in
contract documents
Deficient management,
supervision and coordination
efforts on the part of the project
Inadequate tracing mechanisms
for request of information
Interference in the contractual
duties of the contract
administrator
The absence of team spirit
among the participants
Reluctant to check for
constructability, clarity and
completeness
Changes to standard conditions
of contract
Failure to appoint a project
manager
3
5
11
8
8
3.371
6
4
5
9
11
6
3.286
7
5
4
11
9
6
3.200
8
1
7
15
10
2
3.143
9
4
6
11
10
4
3.114
10
3
9
12
9
2
2.943
11
5
7
11
10
2
2.914
12
6
6
9
14
0
2.886
13
2
12
13
8
0
2.771
14
9
10
7
7
2
2.514
15
The results revealed that the major contributing factor to disputes caused by
clients is late payment to contractor from the client (average index : 4.600). This factor is
very significant based on overall point of view (average index > 4.500). It affects the
progress of the construction and can lead to the inability of the contractor to complete the
project which will subsequently results in construction disputes. Changes and variation
requirement (average index : 4.543) is the second very significant factor contributing to
construction disputes by client. This factor is also regarded as very significant as the
contributor to disputes caused by clients. It is then tailed by other factors which are
found to be of moderately significant and less significant to the cause of disputes by
client as the average index value is below 3.500 level. Followings are the list of top five
significant factors observed from overall point of view on causes of disputes by the
clients:

Late payment to contractor
66

Changes and variation requirements

Poor briefing during design stage

Lowest price mentality in engagement of contractors and designers.

Unrealistic expectations particularly employers who have insufficient financing to
accomplish their objectives
4.3.3
Causes of Construction Disputes by Consultant
Being one of the stakeholders under study, consultant is also presupposed to be
the culprit of construction disputes. This particular section entails the analysis of the
questionnaire concerning the causes of construction disputes by consultant. View from
clients, consultants and contractors are gathered to enable a comprehensive analysis on
the causes of disputes by consultant.
The analysis will focus on the factors with average index of exceeding 4.500
(very significant) and factors with average index score between 3.500 to 4.500 level
(significant). Even so, factors scoring average index lower than 3.500 level is regarded as
moderately significant, less significant and very insignificant are also under scrutiny as
they can be the impetus towards construction dispute caused by consultant . Ten factors
were identified as causes of construction disputes by clients. These factors are ranked and
sorted based on the level of significance as per responses gathered from the
questionnaires. The average index was used to determine how much it affected the
industry or rather how much it had contributed to the problem.
i)
Client’s Point of View
67
There are total of seven questionnaires returned from the client respondent profile.
Table 4.12 below indicates the view from the client’s perspective on the causes of
disputes contributed by the consultants.
Table 4.12: Client’s point of view
Frequency
No.
Statement
1.
Late issue of design
information/drawing
Lack of appropriate competence
and experience
Over-design and underestimating
the costs involved
Variations due to design errors
2.
3.
4.
5.
6.
7.
8.
9.
10.
Unclear delegation of
responsibilities
Design and specification
oversights, and errors or
omissions resulting from
uncoordinated civil, structural,
architectural, mechanical and
electrical designs
Incompleteness of drawing and
specifications
Late information delivery and
cumbersome approach to request
for information’s
Errors/substantial changes in
bills of quantities
Failure to understand its
responsibilities under the design
team contract
1
2
3
4
5
Average
Index
0
0
0
3
4
4.571
1
0
0
0
4
3
4.429
2
0
0
1
3
3
4.286
3
0
0
2
3
2
4.000
4
0
0
2
3
2
4.000
4
0
0
3
3
1
3.714
6
0
0
3
3
1
3.714
6
0
1
1
5
0
3.571
8
0
0
5
2
0
3.286
9
1
1
1
4
0
3.143
10
Rank
Based on the responses from clients as depicted in the table above, the average
index scored between 4.571 and 3.143. This implies that client regard eight factors as
significant and correspond closely to consultant as the cause of construction disputes.
Late issue of design information/drawing is the only factor regarded as very significant to
the cause of dispute by consultant (average index > 4.500). Listed below are the top eight
68
ranked factors contributing to construction dispute by consultant from client’s point of
view.

Late issue of design information/drawing

Lack of appropriate competence and experience

Over-design and underestimating the costs involved

Variations due to design errors

Unclear delegation of responsibilities

Design and specification oversights, and errors or omissions resulting from
uncoordinated civil, structural, architectural, mechanical and electrical designs

Incompleteness of drawing and specifications

Late information delivery and cumbersome approach to request for information’s
ii)
Consultant’s Point of View
Looking from the consultant’s point of view, it is observed that consultants tried
to apportion the causes of disputes in construction to both contractors and clients. Table
4.13 shows the questionnaire results of causes of disputes by consultants looking from the
consultant’s point of view.
Table 4.13: Consultant’s point of view
Frequency
No.
1.
2.
3.
Statement
Lack of appropriate
competence and experience
Design and specification
oversights, and errors or
omissions resulting from
uncoordinated civil, structural,
architectural, mechanical and
electrical designs
Late issue of design
1
2
3
4
5
Average
Index
0
0
0
6
7
4.538
1
0
0
3
5
5
4.154
2
0
0
5
5
3
3.846
3
Rank
69
4.
5.
6.
7.
8.
9.
10.
information/drawings
Over-design and underestimating
the costs involved
Variations due to design errors
Incompleteness of drawing and
specifications
Late information delivery and
cumbersome approach to request
for information’s
Failure to understand its
responsibilities under the design
team contract
Errors/substantial changes in
bills of quantities
Unclear delegation of
responsibilities
0
1
4
6
2
3.692
4
0
1
7
3
2
3.462
5
0
3
4
4
2
3.385
6
0
4
5
2
2
3.154
7
1
3
4
4
1
3.077
8
1
3
5
3
1
3.000
9
2
5
2
4
0
2.615
10
Based on the result above, factors of disputes by consultant from the consultant’s
point of view are observed to be of the range from as high as 4.538 down to 2.615. As
consultant tend to allot the cause of disputes to other stakeholders, only four factors are
observed as being significant from the consultant’s point of view. The top four ranked
factors with average value more than 3.500 are listed based on the level of significance
are as follows:

Lack of appropriate competence and experience

Design and specification oversights, and errors or omissions resulting from
uncoordinated civil, structural, architectural, mechanical and electrical designs
iii)

Late issue of design information/drawings

Over-design and underestimating the costs involved
Contractor’s Point of View
70
Responses from 15 respondents from contractor profile are shown in Table 4.14.
This is with regards from the contractor’s perspective on the disputes caused by
consultants.
Table 4.14: Contractor’s point of view
Frequency
No.
Statement
1.
Over-design and
underestimating the costs
involved
Lack of appropriate competence
and experience
Design and specification
oversights, and errors or
omissions resulting from
uncoordinated civil, structural,
architectural, mechanical and
electrical designs
Late issue of design
information/drawings
Errors/substantial changes in
bills of quantities
Variations due to design errors
2.
3.
4.
5.
6.
7.
8.
9.
10.
Incompleteness of drawing and
specifications
Late information delivery and
cumbersome approach to request
for information’s
Failure to understand its
responsibilities under the design
team contract
Unclear delegation of
responsibilities
1
2
3
4
5
Average
Index
Rank
0
0
0
5
10
4.667
1
0
0
0
8
7
4.467
2
0
0
2
7
6
4.267
3
0
0
3
6
6
4.200
4
0
0
3
6
6
4.200
4
0
0
4
6
5
4.067
6
0
0
5
8
2
3.800
7
0
1
8
3
3
3.533
8
1
4
6
2
2
3.000
9
3
4
3
4
1
2.733
10
Based on the result represented in the table above, contractors rated the ten factors
contributing to construction disputes caused by consultant in between 4.667 and 2.733
level. Consultants and contractors are always regarded as the parties that are closely
dealing with each other during the construction period. Concerning disputes caused by
71
consultant, both parties agreed on the top four ranked factors as also shown in the
preceding result. However, from contractor’s point of view on the construction disputes
caused by consultant, there are eight factors scores above 3.500 level which is considered
as significant to the subject matter. These factors are listed as follows:

Over-design and underestimating the costs involved

Lack of appropriate competence and experience

Design and specification oversights, and errors or omissions resulting from
uncoordinated civil, structural, architectural, mechanical and electrical designs

Late issue of design information/drawings

Errors/substantial changes in bills of quantities

Variations due to design errors

Incompleteness of drawing and specifications

Late information delivery and cumbersome approach to request for information’s
iv)
Overall Respondents
Overall views of the construction disputes caused by consultants are shown in
Table 4.15 below.
Table 4.15: Overall Respondents
Frequency
No.
Statement
1.
Lack of appropriate competence
and experience
Over-design and underestimating
the costs involved
Late issue of design
information/drawings
Design and specification
oversights, and errors or
2.
3.
4.
1
2
3
4
5
Average
Index
Rank
0
0
0
18
17
4.486
1
0
1
5
14
15
4.229
2
0
0
8
14
13
4.143
3
0
0
8
15
12
4.114
4
72
5.
6.
7.
8.
9.
10.
omissions resulting from
uncoordinated civil, structural,
architectural, mechanical and
electrical designs
Variations due to design errors
Incompleteness of drawing and
specifications
Errors/substantial changes in
bills of quantities
Late information delivery and
cumbersome approach to request
for information’s
Failure to understand its
responsibilities under the design
team contract
Unclear delegation of
responsibilities
0
1
13
12
9
3.829
5
0
3
12
15
5
3.629
6
1
3
13
11
7
3.571
7
0
6
14
10
5
3.400
8
3
8
11
10
3
3.057
9
5
9
7
11
3
2.943
10
The result shows that the average index ranges from 4.486 to 2.943. This indicates
that overall perception of client, contractor and consultant differ from one another.
However all off the stakeholders seems to agree that the top seven factors listed are of
significant as the average index is more than 3.500 level. Nonetheless, all of these factors,
if not carefully dealt with will subsequently lead to construction disputes. Followings are
the top seven significant factors, from overall point of view concerning construction
disputes caused by consultant.

Lack of appropriate competence and experience

Over-design and underestimating the costs involved

Late issue of design information/drawings

Design and specification oversights, and errors or omissions resulting from
uncoordinated civil, structural, architectural, mechanical and electrical designs

Variations due to design errors

Incompleteness of drawing and specifications

Errors/substantial changes in bills of quantities
73
Nevertheless, factors such as late information delivery and cumbersome approach
to request for information’s, failure to understand its responsibilities under the design
team contract and unclear delegation of responsibilities are regarded as vague area of
responsibility between contractor, consultant and client which scored less than 3.500 are
ranked as less significant contributor to construction disputes caused by consultants seen
from overall perspective.
4.3.4
Causes of Construction Disputes by Contractor
It is always believed that contractors are the main culprit in dispute causation in
construction industry. Hence, this following section presents the analysis of the
questionnaire in relation to the issue of construction disputes caused by contractors.
Feedbacks from each stakeholder profile namely clients, consultants and contractors are
taken into account to understand the real problem at hand.
The analysis is carried out by assigning rank to each factor in view of their
average index value. Factors that are very significant (average index of exceeding 4.500)
and factors that are significant (average index between 3.500 to 4.500) are the main focus
and need to be emphasized to minimize disputes in construction industry. Nevertheless,
factors with average index lower than 3.500 level is regarded as moderately significant,
less significant and insignificant still need to be highlighted as mutual root cause on the
issue of construction dispute caused by consultant. Total of 12 factors acknowledged as
causes of construction disputes by contractors. The factors are ranked based on their level
of significance according to the average index value. The average index was used to
determine how much it affected the industry or rather how much it had contributed to the
problem.
i)
Client’s Point of View
74
There are seven respondents from the client profile involves in the questionnaire
survey. Table 4.16 depicts the responses for the causes of construction disputes by
contractor from the client’s point of view.
Table 4.16: Client’s point of view
Frequency
No.
Statement
1
2
3
4
5
Average
Index
Rank
1.
Delay/ suspension of works
0
0
0
1
6
4.857
1
2.
Poor standard of work
0
0
0
2
5
4.714
2
Poor planning and program
Fails to proceed works in a
competent manner
Inadequate site management
Delayed payment to
subcontractors
Inadequate CPM scheduling and
update requirements
Failure to understand and
correctly bid or price the works
Lack of understanding and
agreement in contract
procurement
Failure to coordinate its
subcontractors’ work through
effective and timely exchange of
shop drawings
Failure to plan and execute the
changes of works
Reluctance to seek clarification
0
0
0
4
3
4.429
3
0
0
0
4
3
4.429
3
0
0
1
3
3
4.286
5
0
0
2
1
4
4.286
5
0
0
1
4
2
4.143
7
0
0
3
1
3
4.000
8
0
0
3
2
2
3.857
9
0
1
2
3
1
3.571
10
0
1
3
1
2
3.571
10
0
0
5
1
1
3.429
12
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
The results indicated in the table above shows the responses from client’s
perspective on the causes of disputes by contractor. There are 12 factors listed as related
to disputes caused by contractor. Clients seem to infer that 11 out of 12 factors of
construction disputes under study as significantly related to contractors as the average
index value are more than 3.500. The top two factors resulted as very significant to
75
construction dispute caused by contractors. The average index result soar above 4.500
level. Listed below are the 11 significant factors of dispute caused by contractor from
client’s point of view.

Delay/ suspension of works

Poor standard of work

Poor planning and program

Fails to proceed works in a competent manner

Inadequate site management

Delayed payment to subcontractors

Inadequate CPM scheduling and update requirements

Failure to understand and correctly bid or price the works

Lack of understanding and agreement in contract procurement

Failure to coordinate its subcontractors’ work through effective and timely
exchange of shop drawings

ii)
Failure to plan and execute the changes of works
Consultant’s Point of View
The result on table 4.17 represents the responses from the consultant’s view point
on the causes of disputes by the Contractor.
Table 4.17: Consultant’s point of view
Frequency
No.
Statement
1
2
3
4
5
Average
Index
Rank
1.
Delay/ suspension of works
0
0
0
2
11
4.846
1
2.
Poor standard of work
0
0
0
4
9
4.692
2
3.
Inadequate site management
0
0
0
5
8
4.615
3
4.
Poor planning and program
0
0
0
6
7
4.538
4
76
5.
6.
7.
8.
9.
10.
11.
12.
Fails to proceed works in a
competent manner
Inadequate CPM scheduling and
update requirements
Failure to coordinate its
subcontractors’ work through
effective and timely exchange of
shop drawings
Delayed payment to
subcontractors
Failure to plan and execute the
changes of works
Reluctance to seek clarification
Failure to understand and
correctly bid or price the works
Lack of understanding and
agreement in contract
procurement
0
0
2
7
4
4.154
5
0
0
3
6
4
4.077
6
0
0
5
4
4
3.923
7
0
0
6
4
3
3.769
8
0
0
8
2
3
3.615
9
0
2
4
6
1
3.462
10
0
3
5
3
2
3.308
11
0
5
4
3
1
3.000
12
The responses from consultant shows that top four causes of disputes by
contractor are related to the management of the project during construction namely
delay/suspension of works, poor standard of works, inadequate site management, poor
planning and program and fails to proceed works in competent manner. These factors are
rated as very significant as the average index value is more than 4.500. However, from
the consultant’s point of view, there are total of nine factors which scores above 3.500 for
the average index. These factors are considered of being significant to the problem at
hand and need to be emphasized to minimize or avoid construction disputes. Listed below
are the top four very significant factors followed by five significant factors of disputes
caused by contractor from consultant’s point of view.

Delay/ suspension of works

Poor standard of work

Inadequate site management

Poor planning and program

Fails to proceed works in a competent manner

Inadequate CPM scheduling and update requirements
77

Failure to coordinate its subcontractors’ work through effective and timely
exchange of shop drawings

Delayed payment to subcontractors

Failure to plan and execute the changes of works
iii)
Contractor’s Point of View
A total of 15 respondents from contractor profile attempted the questionnaires.
Table 4.18 shows the result of contractor’s point of view on the cause of disputes by
contractors.
Table 4.18: Contractor’s point of view
Frequency
1
2
3
4
5
Average
Index
Delay/ suspension of works
Failure to coordinate its
subcontractors’ work through
effective and timely exchange of
shop drawings
Poor planning and program
0
0
0
8
7
4.467
1
0
0
1
7
7
4.400
2
0
0
1
7
7
4.400
2
Poor standard of work
Fails to proceed works in a
competent manner
Inadequate site management
Inadequate CPM scheduling and
update requirements
Delayed payment to
subcontractors
Lack of understanding and
agreement in contract
procurement
Failure to understand and
correctly bid or price the works
Failure to plan and execute the
changes of works
0
0
5
5
5
4.000
4
0
0
5
5
5
4.000
4
0
1
4
6
4
3.867
6
0
3
6
4
2
3.333
7
0
5
4
4
2
3.200
8
1
2
7
3
2
1
4
5
4
1
3.000
10
1
5
6
2
1
2.800
11
No.
Statement
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
3.200
Rank
8
78
12.
Reluctance to seek clarification
1
5
8
1
0
2.600
12
Contractors tried to condone that they are the major contributors to construction
disputes. From the contractor’s point of view, clients and consultants are also the culprit
of construction disputes. Table 4.18 illustrates the factors contributing to construction
disputes by contractors observing from the contractor’s point of view. The result shows
that contractors agree to only six factors are that are considered as significant to the cause
of disputes by contractors. These factors scores exceeding 3.500 level for the average
index. However, as expected there is no factor regarded as very significant by the
contractors to the subject matter as no average index value exceeding 4.500 recorded.
This shows that contractors try to rebuff that they are the cause of construction dispute.
Followings are the top six significant factors listed based on their level of significance.

Delay/ suspension of works

Failure to coordinate its subcontractors’ work through effective and timely
exchange of shop drawings

Poor planning and program

Poor standard of work

Fails to proceed works in a competent manner

Inadequate site management
iv)
Overall Respondents
The overall respondent’s results shown in Table 4.19 summarize the overall view
from consultant, client and contractors on the disputes caused by the contractor.
Table 4.19: Overall Respondents
Frequency
No.
Statement
1
2
3
4
5
Average
Rank
79
Index
1.
Delay/ suspension of works
0
0
0
11
24
4.686
1
2.
Poor planning and program
0
0
1
17
17
4.457
2
3.
Poor standard of work
Inadequate site management
0
0
5
11
19
4.400
3
0
1
5
14
15
4.229
4
0
0
7
16
12
4.143
5
0
1
8
14
12
4.057
6
0
3
10
14
8
3.771
7
0
5
12
9
9
3.629
8
1
7
13
8
6
3.314
9
1
7
14
8
5
3.257
10
1
6
17
5
6
3.257
10
1
7
17
8
2
3.086
12
4.
5.
6.
7.
8.
9.
10.
11.
12.
Fails to proceed works in a
competent manner
Failure to coordinate its
subcontractors’ work through
effective and timely exchange of
shop drawings
Inadequate CPM scheduling and
update requirements
Delayed payment to
subcontractors
Failure to understand and
correctly bid or price the works
Lack of understanding and
agreement in contract
procurement
Failure to plan and execute the
changes of works
Reluctance to seek clarification
Table 4.19 shows the overall view from all stakeholders regarding disputes caused
by contractors. From the average index value analysis, we can deduce that all
stakeholders agrees on the top eight factors as significant to the problem at hand with
average index value surpass 3.500 level. On top of that, only one single factor agreed by
clients, consultants and contractors as very significant to the cause of disputes by
contractor which is delay or suspension of works. This factor scores an average value of
4.686 which is above 4.500 thus considered as very significant. The followings are top
eight significant factors of disputes by contractors from stakeholder’s perspective:

Delay/ suspension of works

Poor planning and program
80

Poor standard of work

Inadequate site management

Fails to proceed works in a competent manner

Failure to coordinate its subcontractors’ work through effective and timely
exchange of shop drawings

Inadequate CPM scheduling and update requirements

Delayed payment to subcontractors
Inevitably factors that score below 3.500 on average index analysis which is
regarded as moderately significant still need to be put in view as these factors in one way
or another may also lead to construction disputes. It is observed that these factors are of
pre-construction in nature. Listed below are the factors which are moderately significant
to the subject matters.

Failure to understand and correctly bid or price the works

Lack of understanding and agreement in contract procurement

Failure to plan and execute the changes of works

Reluctance to seek clarification
4.3.5
The Effect of Disputes to Stakeholders in the Construction Industry
Undeniably construction disputes have an impact on all stakeholders that can be
classified in terms of project deliverables, financial impact, project quality, human
resources and also relationship between the stakeholders. The effects of construction
disputes on stakeholders are analyzed based on the questionnaires responses. These
responses taking into account views from all stakeholders’ profile. There are 13 effects
identified and become the subject of study. The analyses are carried out by raking out the
effects according to the average index value accordingly. It is unavoidable that disputes
may arise in the construction industry. Nonetheless disputes that are of minor in nature
can be settled impartially, harmoniously and quickly to move forward to the larger
objective of performing the physical construction effectively.
81
i)
Client’s Point of View
Table 4.20: Client’s point of view
Frequency
No.
Statement
1.
Delay to the project
completion
Increase in time-related costs
(such as idled equipment
rental costs, changes in
building materials price, bank
interest, utilities charges and
insurance)
Effects on the costs or
economics of the projects, as
well as the financial returns of
construction parties effort and
investments
Affects the quality of product
to be delivered
Lost of productivity and
efficiency (idled labor and
equipment)
Abandonment of project and
termination of contract
Additional financial costs
especially high cost of litigation
Cost for a deposition, trial or
arbitration preparation
Diversion of manpower away
from the project costs
Third party claims, due to
damages for delay to
construction projects which
affect them.
Damage to reputation of the
parties involved
Cause job stress (emotional
costs) to parties involved
A reduction in bonding capacity
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
1
2
3
4
5
Average
Index
0
0
0
1
6
4.857
1
0
0
0
2
5
4.714
2
0
0
1
1
5
4.571
3
0
0
3
4
4.571
3
0
0
2
2
3
4.143
5
0
0
2
3
2
4.000
6
0
0
2
3
2
4.000
6
0
0
3
2
2
3.857
8
0
1
3
3
0
3.286
9
0
1
4
1
1
3.286
9
0
2
2
2
1
3.286
9
0
2
3
2
0
3.000
12
0
2
4
1
0
2.857
13
Rank
82
in business
Table 4.20 above shows the result gathered from the client’s point of view on the
effect of construction disputes to the construction industry. Clients rated four major
effects of construction disputes as very significant. These effects are classified based on
their average index value of exceeding 4.500 level and considered as a very significant
effect to construction industry. The effects of disputes to the industry are listed as follows
according to the level of significance.

Delay to the project completion

Increase in time-related costs (such as idled equipment rental costs, changes in
building materials price, bank interest, utilities charges and insurance)

Effects on the costs or economics of the projects, as well as the financial returns
of construction parties effort and investments

Affects the quality of product to be delivered
Subsequently, out of 13 effects identified, trailing the very significant effect
discussed above, four are found to be only as the significant effect of construction
disputes to the construction industry from the client’s point of view. These effects scores
average index value hovering between 3.500 to 4.500 level. Followings are the
significant effect of disputes to constriction industry.
ii)

Cost for a deposition, trial or arbitration preparation

Lost of productivity and efficiency (idled labor and equipment)

Abandonment of project and termination of contract

Additional financial costs especially high cost of litigation

Cost for a deposition, trial or arbitration preparation
Consultant’s Point of View
83
Table 4.21 shows the responses from 13 respondents from consultant profile.
Table 4.21: Consultant’s point of view
Frequency
No.
Statement
1.
Delay to the project
completion
Lost of productivity and
efficiency (idled labor and
equipment)
Affects the quality of product
to be delivered
Effects on the costs or
economics of the projects, as
well as the financial returns of
construction parties effort and
investments
Increase in time-related costs
(such as idled equipment rental
costs, changes in building
materials price, bank interest,
utilities charges and insurance)
Additional financial costs
especially high cost of litigation
Diversion of manpower away
from the project costs
Cost for a deposition, trial or
arbitration preparation
Abandonment of project and
termination of contract
Third party claims, due to
damages for delay to
construction projects which
affect them.
Damage to reputation of the
parties involved
A reduction in bonding capacity
in business
Cause job stress (emotional
costs) to parties involved
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
1
2
3
4
5
Average
Index
0
0
1
2
10
4.692
1
0
0
1
3
9
4.615
2
0
0
1
4
8
4.538
3
0
0
1
4
8
4.538
3
0
0
1
6
6
4.385
5
0
0
2
5
6
4.308
6
0
0
2
7
4
4.154
7
0
0
3
6
4
4.077
8
0
3
3
2
5
3.692
9
0
0
7
3
3
3.692
9
1
2
5
5
0
3.077
11
1
3
4
5
0
3.000
12
1
4
4
4
0
2.846
13
Rank
84
Based on the result depicted in Table 4.20 above, consultants rated four effects of
disputes under study as very significant as these effects exceeding 4.500 level for the
average index value. This result shows that consultants agreed with clients on the top
most effect which is delay to the project completion as a very significant effect of
construction disputes. Listed below are the four very significant effects of disputes from
consultant’s perspective.

Delay to the project completion

Lost of productivity and efficiency (idled labor and equipment)

Affects the quality of product to be delivered

Effects on the costs or economics of the projects, as well as the financial returns
of construction parties effort and investments
On top of that, based on the questionnaires answered by the consultants, the result
shows that the following six effects are regarded as significant effect of construction
disputes.

Increase in time-related costs (such as idled equipment rental costs, changes in
building materials price, bank interest, utilities charges and insurance)

Additional financial costs especially high cost of litigation

Diversion of manpower away from the project costs

Cost for a deposition, trial or arbitration preparation

Abandonment of project and termination of contract

Third party claims, due to damages for delay to construction projects which affect
them.
This is then tailed by three effects under study listed by the consultant as
moderately significant as an effect of construction disputes to the construction industry.
These effects are seen as more towards human relation in nature.

Damage to reputation of the parties involved
85

A reduction in bonding capacity in business

Cause job stress (emotional costs) to parties involved
iii)
Contractor’s Point of View
Table 4.22: Contractor’s point of view
Frequency
No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Statement
Delay to the project
completion
Effects on the costs or
economics of the projects, as
well as the financial returns of
construction parties effort and
investments
Lost of productivity and
efficiency (idled labor and
equipment)
Diversion of manpower away
from the project costs
Increase in time-related costs
(such as idled equipment rental
costs, changes in building
materials price, bank interest,
utilities charges and insurance)
Affects the quality of product to
be delivered
Abandonment of project and
termination of contract
Additional financial costs
especially high cost of litigation
Cost for a deposition, trial or
arbitration preparation
Third party claims, due to
damages for delay to
construction projects which
affect them.
Cause job stress (emotional
costs) to parties involved
1
2
3
4
5
Average
Index
Rank
0
0
1
2
12
4.733
1
0
0
0
6
9
4.600
2
0
0
2
2
11
4.600
2
0
0
1
5
9
4.533
4
0
0
3
5
7
4.267
5
0
0
3
6
6
4.200
6
0
0
4
4
7
4.200
6
0
0
5
5
5
4.000
8
0
1
7
5
2
3.533
9
1
2
6
2
4
3.400
10
1
2
7
2
3
3.267
11
86
12.
13.
A reduction in bonding capacity
in business
Damage to reputation of the
parties involved
1
4
6
3
1
2.933
12
2
4
4
5
0
2.800
13
It is interesting to note that from the Table 4.22 above, contractor rated delay to
project completion is the most significant effect of disputes to the construction industry.
This fact fully supports the responses given by both clients and consultants in the earlier
Table 4.20 and Table 4.21. Listed below are four very significant effects of construction
disputes with reference to contractor’s point of view. These effects posted an average
index value exceeding 4.500 level.

Delay to the project completion

Effects on the costs or economics of the projects, as well as the financial returns
of construction parties effort and investments

Lost of productivity and efficiency (idled labor and equipment)

Diversion of manpower away from the project costs
Subsequently, the result shows that consultant rated the following five effects
under study as significant to the effect of construction disputes. Generally, contractor
regards financial impacts on the project and quality of the works as significant with
average index value lies between 3.500 to 4.500. Listed below are the significant effects
of construction disputes from consultant’s point of view.

Increase in time-related costs (such as idled equipment rental costs, changes in
building materials price, bank interest, utilities charges and insurance)
iv)

Affects the quality of product to be delivered

Abandonment of project and termination of contract

Additional financial costs especially high cost of litigation

Cost for a deposition, trial or arbitration preparation
Overall Respondents
87
The overall result gathered from all stakeholders are listed and sorted in Table
4.23 below.
Table 4.23: Overall Respondents
Frequency
No.
Statement
1.
Delay to the project
completion
Effects on the costs or
economics of the projects, as
well as the financial returns of
construction parties effort and
investments
Lost of productivity and
efficiency (idled labor and
equipment)
Affects the quality of product to
be delivered
Increase in time-related costs
(such as idled equipment rental
costs, changes in building
materials price, bank interest,
utilities charges and insurance)
Diversion of manpower away
from the project costs
Additional financial costs
especially high cost of litigation
Abandonment of project and
termination of contract
Cost for a deposition, trial or
arbitration preparation
Third party claims, due to
damages for delay to
construction projects which
affect them.
Cause job stress (emotional
costs) to parties involved
Damage to reputation of the
parties involved
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
1
2
3
4
5
Average
Index
0
0
2
5
28
4.743
1
0
0
2
11
22
4.571
2
0
0
5
7
23
4.514
2
0
0
4
13
18
4.400
4
0
0
4
13
18
4.400
4
0
1
6
15
13
4.143
6
0
0
9
13
13
4.114
7
0
3
9
9
14
3.971
8
0
1
13
13
8
3.800
9
1
3
17
6
8
3.486
10
2
8
14
8
3
3.057
11
3
8
11
12
1
3.000
12
Rank
88
13.
A reduction in bonding capacity
in business
2
9
14
9
1
2.943
13
Table 4.23 shows the cumulative thoughts from clients, consultants and
contractors point of view on the effect of construction disputes on the construction
industry. Base on the results above, all stakeholders agreed that the whole 13 effects
under study are rated as moderately significant, significant and very significant effect of
disputes to the construction industry. This is shown in their average index which scores
above 2.500 level. None of the effect under study is regarded as less significant or
insignificant (average index < 2.500).
Top three effects which score an average index exceeding 4.500 level are
observed as a very significant effect of construction disputes. It covers the issue of
deliverables of the project in terms of meeting the completion date, overall impact on the
financial issue and efficiency of the resources. List of very significant effect of
construction disputes are as follows.

Delay to the project completion

Effects on the costs or economics of the projects, as well as the financial returns
of construction parties effort and investments

Lost of productivity and efficiency (idled labor and equipment)
This is then subsequently followed by effects that scores average index ranging
between 3.500 and 4.500. These factors are lumped as significant effect of disputes to the
industry. Out of five effects regarded as significant, four effects are directly related to
financial impact on the stakeholders. Inevitably shareholders are more sensitive towards
the effects that are of financial in nature. Followings are the details on the effect of
disputes to the construction industry from overall point of view.

Increase in time-related costs (such as idled equipment rental costs, changes in
building materials price, bank interest, utilities charges and insurance)

Diversion of manpower away from the project costs
89

Additional financial costs especially high cost of litigation

Abandonment of project and termination of contract

Cost for a deposition, trial or arbitration preparation
Nonetheless, factors listed below are clustered together as moderately significant
effect of construction disputes. Though these factors are considered as only moderately
significant, they still carried some weight to the effect of construction disputes and worth
looking into. Somehow or other, these effects would pinch the stakeholders and bring in
negative impact to the construction industry. General view of the effects listed below
suggests that these effects are inclined towards human resources related issues such as
job stress, reputation and bonding. Details of moderately significant effect of disputes to
construction industry are as follows.

Third party claims, due to damages for delay to construction projects which affect
them.

Cause job stress (emotional costs) to parties involved

Damage to reputation of the parties involved

A reduction in bonding capacity in business
4.3.6
Disputes Avoidance in Construction Industry
In general dispute can be avoided or minimised the least by employing certain or
a set of dispute avoidance activities. Among the activities that had been proposed or
identified in various literatures included the following:
i)
Early negotiation
ii)
Pre-contract reviews
iii)
Risk audits
iv)
Training
v)
Compliance audits
90
vi)
Better planning
vii)
Partnering approach
viii)
Allocation of risks
ix)
Proper selection of contracts
Within the context of this particular study, three parameters were tested on
respondents regarding this matter. These parameters included:
i)
Respondents awareness or knowledge regarding several disputes
avoidance methods or approaches that have been implemented elsewhere
(such as in the United Kingdom). The irony of this parameter is to coarsely
visualized construction industry participants knowledge on several
suggested approach in avoiding disputes, and their alertness on the options
available to them in avoiding disputes. Bear in mind that, that the most
successful are usually those who keep themselves always up-to-date with
the current knowledge and practices.
ii)
Respondents practise of several disputes avoidance methods or approaches
that have been implemented elsewhere, and of which they are aware or
have knowledge of. This parameter is essentially to coarsely visualized
construction industry participants, level of adoption of the disputes
avoidance approaches that they are aware of. The philosophical idea of
this parameter is that – Those who practice knows better than those who
merely preach.
iii)
Respondents success in avoiding disputes based on their real time
experience applying these disputes avoidance approaches within their
respective trades. This is essentially to review the real time effectiveness
of these suggested dispute avoidance approaches that have been
experienced by respondents.
91
The elaborate response as gathered from the questionnaires from the respondents
were transformed into percentage count respective of each groups as well as the
cumulative percentage of all respondents from all these groups. The following formula
was used to obtained the percentage value:
Assume; X = Respondents indicating YES as their answer
NX = Number of respondents indicating YES as their answer
Y = Respondents indicating NO as their answer
NY = Number of respondents indicating NO as their answer
Therefore; % X = [NX / (NX + NY)] × 100%
These responses are represented for ease through the use of bar charts as shown in
Figure 4.4 - 4.8.
From the study conducted, it was obvious that majority of the respondents are
either aware or have been practising certain or a set of dispute avoidance activities and
this is evident since about 88% of the total respondents who filled and returned the
survey questionnaire, answered the questions regarding this matter.
Figure 4.4: Respondents Awareness on Several Disputes Approach
92
Respondents Awareness on Several Dispute Avoidance Approach
% Respondents
100
Clients Only
90
Consultants Only
80
Contractors Only
70
All Respondents
60
50
40
30
20
10
0
Early
Pre-contract Risk Audits
Negotiation
reviews
Training
Compliance
Audits
Proper
Contract
Selection
Type of Dispute Avidance Approach
Figure 4.5: Respondents Practise of Several Disputes Avoidance Approach
Respondents Practise of Several Disputes Avoidance Approach
% Respondents
100
Clients Only
90
Consultants Only
80
Contractors Only
70
All Respondents
60
50
40
30
20
10
0
Early
Negotiation
Precontract
reviews
Risk Audits
Training
Compliance
Audits
Type of Dispute Avoidance Approach
Proper
Contract
Selection
93
Figure 4.6: Respondents Success in Avoiding Disputes by Practising Several
Disputes Avoidance Approach
Respondents Success in Avoiding Disputes by Practising Several
Dispute Avidance Approach
% Respondents
100
90
80
Clients Only
70
Consultants Only
60
Contractors Only
50
All Respondents
40
30
20
10
0
Early
Pre-contract Risk Audits
Negotiation
reviews
Training
Compliance
Audits
Proper
Contract
Selection
Type of Dispute Avoidance Approach
i)
Early Negotiation
Based on the survey conducted, 83% of the respondents were aware that early
negotiation can be employed to avoid disputes, while the remaining was not aware of it.
Of those whom are aware of it, only 79% are actually practising early negotiation to
avoid disputes. Of these, clients seem to be practising it the most, while contractors the
least, of the three groups surveyed. In terms of the result of practising early negotiations,
78% of those who practise it agree that it helps them in avoiding disputes.
ii)
Pre-contract Reviews
The result from the survey, showed that Pre-contract reviews is a dispute avoiding
activity, which respondents are most familiar with, whereby 89% respondents indicated
that they were aware of it. All the clients that responded indicated their awareness of this
approach, while only 80% of the contractors have the awareness on the use of pre-
94
contract reviews in avoiding disputes. Although, most of the respondents are aware of
this method, only 68% of them actually practise it, of which consultants practise it the
most and contractors the least. In percentage terms only slightly more than half (58%) of
the contractors actually practise it. Of those who are aware of it, 76% agreed that precontract reviews does helps them to avoid disputes, and consultants was the group that
that benefited the most by this method, while surprisingly clients was the least benefited
by this method.
iii)
Risk Audits
Of all the disputes avoidance method presented in the survey, conducting risk
audits was the second least method that respondents are aware of, whereby only 77% are
aware of it’s benefit in avoiding disputes. Similar to the former, clients was the group that
was most aware of this method, and similarly contractors the least. Furthermore, only
59% of those whom are aware of this method actually practise it. Clients were the most
that practise it while again contractors were the least. However, those who conducted risk
audits indicated that this method seems to significantly give positive results in terms of its
ability to avoid disputes whereby 88% of those whom practise it successfully avoided
disputes as far as their response was concerned. Surprisingly all those contractors whom
had practised this method indicated its success in avoiding disputes, while for clients this
method might not suit them fully as only 75% of the clients actually benefited from this
method.
iv)
Training
Providing continuous training for human resources is one of the method which
most respondents are seems to be well aware of. Of this, consultants were the group
which was most aware of this method, while contractor was the least. However, only
73% of those whom are aware actually implemented or provided continuous training for
their human resources. Both consultants and contractors whom are aware of the
importance of continuous training were equally the most active in this matter, while client
95
was the least. In terms of its success in avoiding disputes, 77% of the respondents that
employed continuous training for their human resources acknowledged its effectiveness
in avoiding disputes. Surprisingly all clients whom applied this approach acknowledged
its effectiveness in avoiding disputes. However, this approach does not seems to benefit
contractors greatly, since only 67% of those whom practised this approach obtained
positive results in terms of avoiding disputes.
v)
Compliance Audits
On compliance audits, 80% of the respondents indicated their awareness on this
approach in avoiding disputes. All clients whom responded indicated their awareness,
while contractors were the group that showed the least awareness. Of those whom were
aware of this approach, only 71% had implemented or used this approach, of which
clients was the group which showed the greatest adoption of this approach as compared
to the other groups, while contractors adopted or implemented it the least as far as the
percentage counts showed. In terms of its effectiveness in avoiding disputes, only 70% of
those whom implemented it considered it as effective. Most (83%) of clients
acknowledged the effectiveness of this approach in avoiding disputes. However, only
50% of those contractors whom had implemented this approach acknowledge its
effectiveness, while the other half does not think that this approach is effective in their
quest to avoid disputes.
vi)
Proper Selection of Contracts
It was also suggested in certain literatures that the simplest method of dispute
avoidance can be adopted as early as when anything had not happen yet, that is during the
contract selection stage. The irony of this method is that, only contracts which are
feasible and possible with the least if not zero risks of problems at all are selected to be
undertaken. In relations with this study, most (85%) of those respondents whom are
involved in construction contracts procurements indicated their awareness of the potential
use of this approach in avoiding disputes. However, only 48% of those whom are aware
96
of it actually adopted this approach in their effort to avoid disputes. Clients seem to be
adopting it actively (80%) as compared to both consultants (33%) and contractors (44%)
respectively. In terms of its effectiveness in avoiding disputes, only 64% of those whom
adopted this approach seem to agree on it effectiveness and contractors agreed the most
(75%) on its effectiveness while clients were the least (50%). The possible reason that
most contactors acknowledged its effectiveness in avoiding disputes might be due to the
fact that contractors are usually the one that had to bear most of the risks in construction
projects, which makes them vulnerable towards encountering potentially disputable
circumstances. Therefore, by adopting proper selection of contracts, contractors can
properly study their options and feasibility before undertaking any projects. This may
present them with the chance to avoid undertaking construction projects that are too risky
or beyond their realistic ability to deliver.
4.3.6.1 Management Role in Avoiding Disputes
Such had been discussed in various literatures as well previous studies by others,
the role of individuals or teams that are involved in the management of construction
projects is significantly essential in avoiding disputes. Manager needs to think, decide
and implement policies, business plan and strategies that may enable disputes to be
avoided. Among the approach as suggested in various literatures, that required active
participation on the management part included; better and thorough planning; partnering
approach; and risks allocation among construction projects participants.
97
Figure 4.7: Management Practise on Several Disputes Avoidance Approach
Management Practise on Several Disputes Avoidance Approach
% Respondents
100
90
80
70
Clients Only
60
Consultants Only
50
Contractors Only
40
All Respondents
30
20
10
0
Better and thorough
Partnering approach
Risk allocation
planning
Type of Dispute Avoidance Approach
Figure 4.8: Management Success in Avoiding Disputes by Practising Several
Disputes Avoidance Approach
Management Success in Avoiding Disputes by Practising Several
Disputes Avoidance Approach
% Respondents
100
90
80
70
60
Clients Only
50
Consultants Only
40
Contractors Only
30
All Respondents
20
10
0
Better and thorough
planning
Partnering approach
Risk allocation
Type of Dispute Avoidance Approach
98
i)
Better and Thorough Planning of Construction Projects
Based on the response collected from the survey, most (78%) of the respondents
that are involved in the management of construction projects indicated that they had
adopted this approach in construction projects that they undertook. Contractors seems to
be the group that was most active (83%) in adopting this approach, while clients was the
least active (67%) in pursuing this approach. However, it should be noted that the number
of respondents in the clients group that are involved in the management of construction
projects are fairly small (as far as this survey was concerned) as compared to those who
had responded from the contractors group, thus the small percentage value might not
reflect the true adoption of the real population of clients of construction projects in
general. In terms of its effectiveness, 90% of the respondents whom are involved in the
management and adopted this approach, acknowledged the effectiveness of this approach
in avoiding disputes in the construction projects that they undertook. All of the clients
and consultants that responded agreed to the effectiveness of this approach, while only
80% of the contractors agreed. However, since the number of respondents coming from
the clients side is relatively smaller as compared to both the consultants and contractors
group, therefore the 100% agreement coming from the clients side may still be disputed.
But as whole, better and thorough planning is still significantly important in part of the
management for the purpose of avoiding disputes.
ii)
Partnering Approach
Regarding the partnering approach, response from the survey indicated that this
was the least practised or adopted approach in avoiding disputes. Only 44% of the
respondents whom are involved in the management of construction projects actually
adopted this approach. Only 50% of the respondents that are involved in the management
of construction projects from the contractors group adopted this approach, and this was
actually the highest percentage among the three groups comparatively, whereby both
clients and consultants showed an even lower percentage of adaptation of this approach.
The reason for this sporadic lack of partnering among participants of construction
99
projects might be too many and maybe too complex to be pinpointed within this work,
but several possible reasons that are suggested included; incoherent interest and business
objectives fuelled by business competition; lack of trusts; ineffective communications
and negotiation skills; non-symbiotic interactions among participants and industry
players; and, human ego. Although this approach was the least practised by all, it instead
seems to be the most effective approach in avoiding disputes, whereby all of the
respondents who practised it regardless of which groups, considered it to be effective in
avoiding disputes. It is suggested that the reason for this, might be that partnering
provides a platform to which participants or partners can stand side by side in planning,
implementing and coordinating works, processes and procedures in relation with the
projects undertaken, as well as providing a healthy, transparent and coherent platform for
resolving issues regarding projects that are undertaken by the partnership, thus potentially
avoiding disputes from emerging.
iii)
Risk Allocation
From the survey conducted, 74% of the respondents that are involved in the
management of construction projects adopted the risks allocation approach in managing
and implementation of the construction projects being undertaken. This approach seems
to be adopted mainly (75%) by both consultants and contractors alike, while clients are
the least (67%) to adopt this particular approach. However since the number of
respondents from the clients group was comparatively smaller than the other groups (with
respect to this study), thus this percentage might not reflect the real scenario within the
general clients group regarding this approach. In terms of effectiveness, 75% of those
whom adopted this approach acknowledged its effectiveness in avoiding disputes. All of
the respondents from the clients group whom adopted this approach agreed on its
effectiveness, while contractors showed the least percentage (67%) of those whom agreed
that this approach was effective. It is suggested that, the reason for this, might be due to
the fact that clients are in a more superior position to allocate risks to those (contractors)
whom are delivering their intended products. Therefore, contractors are burdened with
the tasks to allocate these risks further onwards to other participants and this might be
100
where things might be sticky, since obviously others are happier to be burden with only
the smallest risks or not at all and potentially would try to evade from being burdened by
any risks. Thus the inability to fully allocate risks further and appropriately might force
contractors to heap those unintended risks and making themselves vulnerable towards
circumstances where disputes might emerge. For consultants, allocating risks among
other participating consultants of a construction project might be easier, but there is a
possibility that risks might be harder to be allocated on the shoulders of contractors as
they had enough risks to think of thus may only allow minimum allocation on them, thus
potentially creating a situation of insufficient risks allocation, resulting in the inability to
avoid disputes from occurring.
101
CHAPTER V
CONCLUSION AND RECOMMENDATION
5.1
Introduction
This is the last chapter of the study which will conclude all the study that had
been carried out. It included the literature review and findings of the field study that
carried out in Chapter IV. Conclusion will be made based the objectives that had been
outlined in the first chapter.
5.2
Conclusion
Objective 1: To identify the causes for disputes in the construction industry
From the research, in general terms, lack of communication and workmanship or
quality control problems are the most important cause of disputes among parties involved
in construction projects.
However, disputes that arise from clients are mainly due to late payment to
contractors as well as changes and variation requirement. From consultants point of view,
changes and variation requirement from clients was considered as the main cause of
102
disputes. For contractors, they too considered late payment as well as changes and
variation requirement, as two of the main causes of disputes arising from clients.
With respect to consultants, clients considered the late issue of design
information/drawing as the major cause of disputes by consultants. Between consultants
alike, the most common causes of disputes among is lack of appropriate competence and
experience. From contractor’s point of view, the most common causes of disputes by
consultants is over-design and underestimating the costs involved.
With respect to contractors, from clients points of view the main causes of
disputes by contractors are delay or suspension of works and poor standard of work.
Consultants instead highlighted four main causes of disputes by contractors which
included; delay or suspension of works; poor standard of work; inadequate site
management; and, poor planning and program. Contractors instead seem to disagree that
most of the causes of disputes arises from their part of the deal. Of all the causes under
study, only some were regarded by contractors to be possibly assigned to them. These
included; delay or suspension of works; failure to coordinate its subcontractors’ work
through effective and timely exchange of shop drawings; poor planning and program;
poor standard of work; failure to proceed works in a competent manner; and, inadequate
site management.
Objective 2: To study the effect of disputes in the construction industry
On the effect of disputes towards construction projects participants, as far as
clients are concerned, the four major effects of disputes on them included; delay to the
project completion; increase in time-related costs; effects on the costs or economics of
the projects; and, effects on the quality of products (projects) to be delivered.
For consultants, the major effects of disputes included; delay to the project
completion; lost of productivity and efficiency; effects on the quality of products
(projects) to be delivered; and, effects on the costs or economics of the projects.
103
The major effects acknowledged by contractors included; delay to the project
completion; effects on the costs and economics of the projects; lost of productivity and
efficiency; and, diversion of resources.
Conclusively in general, disputes without any doubt do bear effects on all parties
concerned. Categorically the major effects of disputes are those that concerns time as
well as money, while those consequences from the legal terms was also considered
significant as the other potential effects of disputes.
Objective 3: To identify ways to mitigate disputes in construction.
Finally, dispute can effectively be avoided or mitigated by adopting certain or
series of dispute avoidance activities. These included; implementing early negotiation;
conducting pre-contract reviews; conducting risks audits; conducting continuous training
to enhance the quality and readiness of the relevant workforce to deal with disputable
circumstances; conducting compliance audits to ensure every details matches what was
planned; adopting better and thorough planning; subscribing to partnering approach;
proper and realistic allocation of risks among participants; and, proper selection of
contracts to be undertaken. Although effective, these dispute avoidance approaches does
not guarantee anybody full exclusion from experiencing disputes. This might be due to
inappropriate disputes avoidance measures being adopted (just like subscribing cough
syrup to treat muscular pain problems), as well insufficient measures or approaches being
adopted (just like using 1 liter of petrol and a cup of water in the radiator to travel a
thousand miles), since an approach may at its best tackle certain causes of disputes but
not the others. Of all the dispute avoidance approach suggested the partnering approach
was seen as the most effective but probably the hardest to be adopted since its’ adoption
would first require a successful establishment of partnership among parties involved and
a right partner is never easy to find. However, for those who can’t afford a right partner,
there is still a list of other adoptable approaches that are just as effective as the partnering
approach in avoiding disputes.
104
5.3
Recommendation
With respect to the findings as well as the conclusions drawn out from this study,
several practical recommendations are worth forwarded for possible implementation. The
first and most obvious is that all parties involved in construction projects must step up
their effort and gives more emphasis on the issue of communication, workmanship and
planning, and should make an effort to adopt methodologies which can bear
improvements for them in these matters, since these were regarded as by all participants
as some of the most common causes of disputes. Both communication and workmanship
issues may be improved through continuous training, since training might provide those
relevant workforces with the necessary skills upgrade and enhancements that are vital in
delivering professional and high quality performance in executing projects at hand. The
ability to plan instead can’t be enhance nor improve by mere training. Planning in its true
nature is not as easy as spelling the word; it is indeed a delicate skill that require years of
experience and intuition before near perfection. Therefore it is recommended that
planning teams should be made up or guided by those with sufficient experience and
good track record in order to come up with the best possible plan.
Secondly, it is recommended that clients should adopt methodologies which may
limit the need for changes till the least as possible if not at all, since changes and
variations requirements coming from clients were acknowledged to be one of the major
causes of disputes. One such approach might be by adopting early and comprehensive
planning of project to be undertaken, since a well constructed plan may eliminate the
need for changes and variations unless any real unexpected circumstances appears such
as natural disaster or other beyond control events. Even so, a thoroughly produced plan
should include a sub-plan of action against any unexpected eventualities.
Contractors in the other hand, since they are most of the time burdened with
nearly all of the blame, therefore may need to press even more effort into approaches that
105
might improve their standings in various dispute causing aspects. Since the option of
approaches that can be choose and implemented are rather broad, all they might need is
the desire to apply or use it.
Finally it is also recommended that for future works, the relationship between the
psychological sides of participants with the various practiced policy by governing or
authoritative institutions, be investigated and its potential impacts and consequences
(especially those related to the cause and effect of disputes) be addressed. The essence of
this recommendation is that certain policies such as selective award of contracts which
lacks justified credentials, may result in so-so mentality that do not enhances their actual
competencies, and in long run may affect the whole industry players image at global
arena hence limiting their global marketability.
106
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110
APPENDIX A
MINIMISATION CONSTRUCTION DISPUTES
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.
Working Experience:
Less than 5 years
5 years to 10 years
10 years and above
5. Type of Organization.
Client
Consultant
Contractor
111
APPENDIX A
Causes of Construction Disputes Construction Industry
Section II
Please indicate your opinion for the following causes of construction disputes
Indicator, 1: Insignificant
2: Less Significant
3: Moderately Significant
4: Significant
5: Very Significant
A. Causes of construction Disputes in General
11) Personality clashes between the various parties to the contract
and/or member of project team
12345
2) Differing goals and objectives of the various parties
12345
3) A prevailing confrontational/adversarial atmosphere
12345
4) Lack of proper communication between the parties
12345
5) Allocation of insufficient resources
12345
6) Complexity of the works under the contract
12345
7) Allocation of inadequate time for the preparation of contracts
and their discharge
8) Workmanship or quality control problems
12345
12345
9) Lack of proper planning both in terms of physical work
and financial aspects
12345
10) Lack of good faith on part of the parties
12345
11) Failure to resolve minor differences on an amicable basis
12345
112
APPENDIX A
Causes of Construction Disputes among Stakeholders in the
Construction Industry
B. Causes of construction Disputes by client
1) Poor briefing during design stage
12345
2) Changes and variation requirements
12345
3) Changes to standard conditions of contract
12345
4) Interference in the contractual duties of the contract
administrator
5) Late payment to contractor
12345
12345
6) Unrealistic expectations particularly employers who have
insufficient financing to accomplish their objectives
12345
7) Fail to pay variation claim
12345
8) Failure to respond in timely manner
12345
9) Inadequate tracing mechanisms for request of information
12345
10) Deficient management, supervision and coordination efforts
on the part of the project
12345
11) Lowest price mentality in engagement of contractors and
designers.
12345
12) The absence of team spirit among the participants.
12345
13) Reluctant to check for constructability, clarity and completeness.
12345
14) Failure to appoint a project manager
12345
15) Discrepancies / ambiguities in contract documents.
12345
113
APPENDIX A
Causes of Construction Disputes among Stakeholders in the
Construction Industry
C. Causes of construction disputes by consultants
1) Over-design and underestimating the costs involved.
12345
2) Lack of appropriate competence and experience
12345
3) Unclear delegation of responsibilities
12345
4) Late issue of design information/drawings
12345
5) Errors/substantial changes in bills of quantities
12345
6) Variations due to design errors
12345
7) Design and specification oversights, and errors or omissions
resulting from uncoordinated civil, structural, architectural,
mechanical and electrical designs
12345
8) Failure to understand its responsibilities under the design
team contract
12345
9) Late information delivery and cumbersome approach to
request for information’s
10) Incompleteness of drawing and specifications
12345
12345
114
APPENDIX A
Causes of Construction Disputes among Stakeholders in the
Construction Industry
D. Causes of construction disputes by contractor
1) Inadequate site management
12345
2) Poor planning and program
12345
3) Poor standard of work
12345
4) Delayed payment to subcontractors
12345
5) Fails to proceed works in a competent manner
12345
6) Failure to coordinate its subcontractors’ work through effective
and timely exchange of shop drawings
7) Lack of understanding and agreement in contract procurement
12345
12345
8) Delay/ suspension of works
12345
9) Failure to plan and execute the changes of works
12345
10) Failure to understand and correctly bid or price the works
12345
11) Reluctance to seek clarification
12345
12) Inadequate CPM scheduling and update requirements
12345
115
APPENDIX A
The Effect of Disputes to Organisation in Construction Industry
Section III
Please rate the following statements on the scale from 1 to 5, where 1 is
least severe where 5 is the most severe.
1
2
3
4
Least Severe
5
Most Severe
1) Effects on the costs or economics of the projects, as well as the
financial returns of construction parties effort and investments
12345
2) Additional financial costs especially high cost of litigation
12345
3) Diversion of manpower away from the project costs
12345
4) Cost for a deposition, trial or arbitration preparation
12345
5) A reduction in bonding capacity in business
12345
6) Damage to reputation of the parties involved
12345
7) Abandonment of project and termination of contract
12345
8) Delay to the project completion
12345
9) Third party claims, due to damages for delay to construction
projects which affect them.
12345
10) Increase in time-related costs (such as idled equipment rental
costs, changes in building materials price, bank interest,
utilities charges and insurance)
12345
11) Lost of productivity and efficiency (idled labor and equipment)
12345
12) Affects the quality of product to be delivered
12345
13) Cause job stress (emotional costs) to parties involved
12345
116
APPENDIX A
Minimisation of Disputes in Construction Industry
Section IV
A. DISPUTE AVOIDANCE
In general, dispute can be avoided or be minimized the least, by employing certain
or a set of dispute avoidance activities.
1. Early negotiation is considered as one of the most used method for avoiding disputes.
a) Are you or your company aware that early negotiations can be employed to avoid
disputes?
Yes
No
If Yes, please proceed to question 1 b), if No, please proceed to question 2.
b) Have you or your company ever used early negotiations in order to avoid
disputes?
Yes
No
If yes, please proceed to question 1 c), if No, please proceed to question 2.
c) Does early negotiation helps you or your company avoids disputes?
Yes
No
If No, please specify the reason/s:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
117
APPENDIX A
2. Pre-contract reviews are another most used method for avoiding disputes.
a) Are you or your company is aware that pre-contract reviews can be employed to
avoid disputes?
Yes
No
If yes, please proceed to question 2 b), if No, please proceed to question 3.
b) Have you or your company ever conducted pre-contract reviews in order to avoid
disputes?
Yes
No
If yes, please proceed to question 2 c), if No, please proceed to question 3.
c) Do conducting pre-contract reviews help you or your company avoids disputes?
Yes
No
If No, please specify the reason/s:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
3. Conducting risk audits are another method for avoiding disputes.
a) Are you or your company is aware that risk audits can be employed to avoid
disputes?
Yes
No
If yes, please proceed to question 3b), if No, please proceed to question 4.
118
APPENDIX A
b) Have you or your company ever conducted risk audits in order to avoid disputes?
Yes
No
If yes, please proceed to question 3 c), if No, please proceed to question 4.
c) Do conducting risk audits help you or your company avoids disputes?
Yes
No
If No, please specify the reason/s:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
4. Another method that can be employed to avoid disputes is by providing continuous
training for your human resources, especially those involved directly in construction
projects. Essential trainings to enhance skills included; communication and negotiation
skills, leadership skills, teambuilding, specific skills such as legal knowledge, codes and
specifications, record keeping and file management, and other skills that are important in
ensuring smooth running of construction projects.
a) Are you or your company is aware that continuous training has an effect in
avoiding disputes?
Yes
No
If yes, please proceed to question 4 b), if No, please proceed to question 5.
119
APPENDIX A
b) Have you ever involved in or provides continuous training that can assist you or
your human resources in avoiding disputes?
Yes
No
If yes, please proceed to question 4 c), if No, please proceed to question 5.
c) Do the trainings that you received or your company provided help you or your
company’s human resources to avoid disputes?
Yes
No
If No, please specify the reason/s:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
5. Disputes can also be avoided by conducting compliance audits, to ensure intended
quality can be achieved.
a) Are you or your company is aware that disputes can be avoided through
conducting regular compliance audits?
Yes
No
If yes, please proceed to question 5 b), if No, please proceed to question 6.
b) Have you or your company ever conducted or involved in compliance audits in
order to avoid disputes?
Yes
No
If yes, please proceed to question 5 c), if No, please proceed to question 6.
120
APPENDIX A
c) Do conducting compliance audits help you or your company to avoid disputes?
Yes
No
If No, please specify the reason/s:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
6. In part of the management, dispute can be avoided through thorough and better
planning, for example by ensuring that contract documents are clear and precise.
a) Are you involved in the management or the management teams of construction
projects?
Yes
No
If yes, please proceed to question 6 b), if No, please proceed to question 7.
b) Do you or your teams exercise thorough and precise planning in any of the
construction projects that you or your teams undertook?
Yes
No
If Yes, please proceed to question 6 c), if No, please proceed to question 7.
121
APPENDIX A
c) Does the thorough and precise planning exercised help you or your team to avoid
disputes?
Yes
No
If No, please specify the reason/s:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
7. In terms of project management, disputes can be avoided by utilizing project and
business structure which lessen the risks of disputes. The best approach suggested is
through employing the partnering approach.
a) Are you involved in the management or the management teams of construction
projects?
Yes
No
If yes, please proceed to question 7 b), if No, please proceed to question 8.
b) Do you or your company employ the partnering approach in the construction
projects that you or your company undertook?
Yes
No
If Yes, please proceed to question 7 c), if No, please proceed to question 8.
122
APPENDIX A
c) Does the partnering approach you or your company employed help you or your
company to avoid disputes?
Yes
No
If No, please specify the reason/s:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
8. Risk allocation is another method of which disputes can be avoided, especially in part
of the management. The proper and acceptable allocation of risks based on the principle
of action-consequences relationship among the parties involved in any construction
projects can be implemented so each of the party involved will be more proactive in
avoiding disputes.
a) Are you involved in the management or the management teams of construction
projects?
Yes
No
If yes, please proceed to question 8 b), if No, please proceed to question 9.
b) Do your company and its partners implement risk allocation as a way to avoid
disputes?
Yes
No
If Yes, please proceed to question 8 c), if No, please proceed to question 9.
123
APPENDIX A
c) Does the risk allocation being implemented by your company help to avoid
disputes?
Yes
No
If No, please specify the reason/s:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
9. It was also suggested that disputes can also be avoided by proper selection of
construction contracts itself, meaning, select contracts with the least possibility of
problems.
a) Are you or your company is involved in procuring construction contracts?
Yes
No
If yes, please proceed to question 9 b).
b) Are you or your company is aware that disputes can be avoided through proper
and thorough selection of construction contracts?
Yes
No
If yes, please proceed to question 9 c).
c) Do you or your company properly or thoroughly select construction projects to be
undertaken?
Yes
No
If yes, please proceed to question 9 d).
124
APPENDIX A
d) Does the selecting of proper construction contracts help you or your company
avoids disputes?
Yes
No
If No, please specify the reason/s:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
THANK YOU FOR YOUR COOPERATION