Disputes Prevention & Resolution (Best Practice)

In order to reduce conflict and litigation in the construction industry, a comprehensive and systematic approach to the prevention and resolution of disputes must be adopted. However, one must understand the following concepts in order to implement the change: (RS23-1, p. 17)

• A change is required. Conflict and litigation are serious problems in the construction industry. Management resources which should be directed towards the primary goals of the industry are diverted, cost-effectiveness is reduced, and little of lasting benefit is achieved.
• Conflict and litigation are the end result of the claims process. The process starts when problems are permitted to escalate into disagreements and disputes. It continues when these, in turn, escalate into conflicts and litigation. The process grows in hostility and cost.
• Early and continuing involvement is critical. Prevention is better than resolution, but given the nature of the construction industry, disputes will occur. Management must take proactive steps throughout the project life cycle to prevent and resolve disputes.

In order to create a comprehensive system for dispute prevention and resolution, a project must:

• Start Right by having clear objectives, scope, and schedule in the pre-construction engineering and documentation stage. CII provides information to improve engineering and documentation which have a positive impact on dispute prevention.
• Stay Right by preventing problems from escalating into disagreements and disputes during construction. Partnering, team building, and other techniques to improve relationships will positively impact the ability to stay right.
• Provide for Resolution by focusing on the need to prevent disputes from escalating into conflict and litigation. Quick and efficient on-site dispute resolution that is fair to both parties must be taken. DRBs have been found to be effective.

Dispute Review Boards (DRB) can be an effective way to facilitate timely on-site resolution of disputes, preventing matters from escalating costs and timelines. They have played a major role in preventing and resolving disputes in the public heavy civil engineering sector of the construction industry, and the research shows that they can be applied to the private sector.
(SD-95, p. 35)

Claims is a process, which escalates in both cost and time as the dispute is addressed further from the day-to-day activity and personnel. Addressing problems before they result in conflict avoids the Continental Divide and limits exposure to delays and escalating costs. As such, disputes are best resolved with on site with the project managers playing a major role. This insures that those directly involved with the dispute remain involved with its resolution and that this takes place in parallel with the performance of the work. 

The existence of a DRB forces project managers to benchmark their decisions, actions and inactions against what would be seen as fair and reasonable by the board. This has a positive effect on attitudes and helps avoid litigation.

In order to “start right,” research shows that it is the owner, their lawyers, and their project managers that hold the key to implementation. This can be done by the owner insisting on proper scope definition and objective setting in the pre-construction phase. They can also promote team building and partnering to “stay right.”

IR23-2, Prevention and Resolution of Disputes Using Disputes Review Boards

Is a document created by the research team with the following objectives: 

• To study the functioning of dispute review boards (DRBs) in the field in order to identify the factors that contribute to their success or failure.
• To determine whether DRBs can be successfully implemented in the private commercial and industrial sector of the industry, and:
  • If the conclusion is negative, state why DRBs cannot be used.
  • If the conclusion is positive, develop practical guidelines for implementing DRBs in the private commercial and industrial sector of the industry.

SP23-3, Disputes Potential Index, Version 2.0

The overall goal of this predictive tool is to reduce the incidence of contract disputes that often plague construction projects, resulting in delays, cost overruns and litigation. In order to take effective action to prevent disputes, those responsible for construction projects must first acknowledge the possibility of costly disputes affecting their projects. The research accomplishes this goal by providing statistically-based insight into the factors associated with why disputes occur. The DPI tool provides those responsible for projects with the ability to assess the risk of disputes on any particular project using a quantifiable measure. By using the DPI tool, an overall score is obtained that predicts the likelihood of disputes arising on a given project. Even where the overall risk of disputes is relatively low, the DPI tool may indicate specific aspects of a project that are relatively weak, thus identifying areas for further improvement in overall project success.

 

Version 2.0 transforms the DPI tool into an Excel spreadsheet.