Being involved from the outset of a construction project can be exciting, especially when you think everything will go according to plan, and the project will be completed on time and to budget. But, given the number of different contractors and subcontractors involved in projects, how frequently does this occur?
Avoiding conflict is often quite challenging because there are many individuals working on the project, all with different levels of experience, standards, and skill sets.
A dispute can make or break a project. When unresolved, they have the capacity to damage reputations and relationships, and frequently lead to projects that are over budget, late, and of poor quality.
Root causes for disputes?
According to HKA's CRUX integrated research programme 2021 report, over 1400 projects across 90 countries had an average capital spending of $1.8 billion on their projects. With an average claim value of $100 million.
While there are various reasons why conflicts arise, the key underlying factors were shown to be:
- Scope Changes and Design Failures
It happens far too frequently that people rush into construction without fully understanding the project's scope and design solutions. This causes uncertainty and opens the door to alterations that are not agreed and whose impact is not understood Therefore, it is more beneficial in the long run to invest more time developing the scope at the outset.
- Conflicting Interpretation of Contracts
Standard forms of contracts, like JCT, NEC and FIDIC, are frequently used in the construction and engineering sector. However, they are not always presented in the correct format for the particular project. The necessity for flexibility and revisions might occasionally lead to a distortion in how that contract is interpreted. Conflicts arise from a lack of understanding of how the contract operates and its restrictions, particularly when revisions are made that are not fully developed, thought through and or agreed and understood.
- Mismanagement of Subcontractors
Some contractors attempt to place fairly burdensome terms and risks on subcontractors who are not best equipped to manage and deal with those risks, which impairs their capacity to deliver quality work.
The Conflict Avoidance Process?
The Conflict Avoidance Process essentially uses collaboration and early intervention to help parties avoid, manage and resolve their disputes.
There are many ways that this can be done, some of which are listed below:
- Properly Drafted Contracts
A well-written contract that reduces the likelihood of disputes will clarify the scope of the works it covers, the location, defines ambiguous terms, implements effective risk management, includes an early dispute process where issues are discussed and dealt with appropriately, and offers a reasonable compensation process for any variations.
- Conflict Avoidance Panels
The Conflict Avoidance Panel includes a review that is carried out by an impartial panel and offers a non-binding recommendation. The panel includes up to three experts in dispute resolution who are qualified in the area concerning the dispute. The specialists can visit the location, liaise with the workers, and use their own skills to produce a report and a suggestion. Anybody who disagrees with something is invited to explain and potentially justify their position.
- Early Neutral Evaluation
This includes appointing an impartial assessor to assess any risks connected to a developing conflict. This aids the parties in comprehending the possible results of litigation or arbitration so they can handle their dispute appropriately moving forward.
- Dispute Avoidance Boards
A Dispute Avoidance Board, or "DAB," is a body made up of one to three members who are representatives chosen by the contractor, the employer, and an impartial third party. When there is a difference of opinion, the DAB is notified. They invite the parties to meet to discuss and attempt to settle the problem at hand. Until an arbitrator or a Court order otherwise, the parties would be contractually obligated to comply.
For conflict avoidance panels, early neutral evaluations and dispute avoidance boards to apply, these need to be included in the contract.
Importance of the Conflict Avoidance Process?
- Maintain Relationships and Reputation
A good relationship with those that you work with is essential in construction. Implementing a conflict avoidance approach enables collaborative problem-solving when handling an issue as opposed to a competitive argument between two sides.
Collaborative working allows for a good long-term relationship that intensifies over time. This means you would be able to work with the same people on multiple future occasions or that they would recommend you to others.
- Ensure Project Runs Smoothly
Where a conflict avoidance process is incorporated into the contract, it ensures that any issues are resolved quickly and with the least amount of disruption to the project.
- Saves Money and Time
When a conflict avoidance procedure is in place, any disputes are resolved internally, keeping them out of the Court. Therefore, issues are resolved effectively and speedily, as opposed to via arbitration or litigation, which may take weeks or months to resolve the problem at hand.
To view detailed notes from the webinar, please use the following link: https://www.bartonlegal.com/site/webinars/april-2022-martin-burns-paul-cacchioli-len-bunton
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
