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Construction Disputes
Seeking Sensible Solutions
Wayne Clark
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eBook - ePub
Construction Disputes
Seeking Sensible Solutions
Wayne Clark
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About This Book
This book reflects the author's fifty years' experience in international construction projects and the management and resolution of disputes. During those fifty years, Wayne Clark's aim has always been to guide parties towards sensible and clear communication, nurturing relationships and seeking early solutions to their differences. His primary goal is to help parties avoid unnecessary conflict – a theme that is clearly evident throughout this book. While two chapters are devoted to preparing construction claims to persuade a tribunal – and in so doing persuade the other side to reach an amicable settlement – the book covers a much wider scope: from the building owner's dream through to the contractor handing over the completed project, wise contract administration, settlement negotiations, the third-party resolution process and, finally, arbitration. During each of these stages, the theme is for the parties to continually seek ways to resolve their differences. The book also introduces the idea of the 'shadow arbitrator', who, if commissioned early in the dispute process, can guide parties and legal counsel to prepare claims and arbitral pleadings that will persuade a tribunal – and encourage the parties to find sensible solutions.
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Desarrollo personalSubtopic
Resolución de conflictoschapter 1
Managing Construction Projects to Prevent Disputes
All parties to a construction project will have the same objective: complete the project to a high standard, on time and within budget. Efficient performance will minimize disputes and ensure good relationships are maintained.
Managing construction projects to prevent disputes is about getting the job done and getting it done well.
Careful planning and good performance by all parties are prerequisites for the success of any construction project. By all parties I mean the employer, employer’s representatives, contractors, subcontractors and suppliers. Planning and performance are essential for all phases of a project, from the employer’s concept (or dream) through to completion and handing over the works.
The various construction project phases we will discuss in this chapter, each with a focus on dispute avoidance, are
- employer’s concept and planning,
- the tender (bidding) phase,
- the construction phase and
- the employer’s taking over of the completed works.
Two other important areas of construction management that are necessary to help prevent or minimize disputes are wise contract management and managing people. We will look at managing people later in this chapter and discuss wise contract management in the next.
Employer’s Concept and Planning
When an employer wishes to engage in a construction project – to build something – be it a private development or the expansion of a country’s infrastructure, the employer will usually appoint an architect or engineer to convert the employer’s idea, its concept, into detailed design drawings and project documents. These drawings and project documents will form the basis of the contractor’s scope, price and time for executing and completing the project works.
Thorough planning by the employer and meticulous preparation of the project documents by the employer’s team (architect, engineer, quantity surveyor, etc.) are fundamental to the success of any construction project. It is essential for the employer to allow its team enough time to prepare the necessary documents, ensuring that they are well thought through and, more importantly, that they are complete.
An important decision to be made by the employer early in the initial planning stage is the type of contract to be used for its project. A clear understanding by the employer and its team of the various forms of contract available, and the importance of choosing the right contract, can be a deciding factor in whether a project runs smoothly or runs into trouble.
A few years ago, I was invited to conduct a workshop for an employer’s board of directors on the various forms of contract it was considering for its new project. The board members could not agree on the allocation of risk to be borne by the contractor. Some members advocated that the contractor should bear all the risks, while others were concerned how this might impact on their limited budget. The contracts they were debating over were three of the FIDIC 1999 suite of contracts (books): namely, the Red Book, the Yellow Book and the Silver Book.1
The workshop lasted three days. All three of the FIDIC contracts, plus a few other standard forms of contract I introduced, were examined in detail. The discussions were constructive and we all learned a considerable amount about the various contracts that would or would not work for the project. We also discussed the importance of the contract documentation being well structured, unambiguous and, most of all, complete.
The contract eventually selected by the board included a balanced allocation of risk. The project documents prepared by the employer’s team were clear and explicit regarding scope and risk, and, importantly, the documents were complete before tenders were invited. The result? The project was completed on time, was conflict free and the final cost was within the employer’s budget.
Trouble is often born at the planning (concept) stage of a construction project. Rushing to start a project without allowing sufficient time to properly prepare, having insufficient budget, disproportionate risk allocation, or allotting inadequate time for executing the construction works are all ingredients for trouble. They are recipes for failing to achieve the primary objective of all parties: a project that is completed on time, within budget and without conflict.
Another project I worked on some years ago is an example of rushed planning and unrealistic budgeting by the employer. Initial tenders were invited on a design-build basis, with the contractor bearing the vast majority of risks. All bids received by the employer were significantly over budget. There was little time or hope for the employer – the government – to be granted any additional funds for the project. Panic ensued. This was an extremely important and sensitive project for the employer. Emergency meetings were held with the employer’s project team (architect, engineer and quantity surveyor). What to do? Hasty decisions were made. The architect was to amend the tender drawings, reducing some areas of the building. This would save money. The engineer and the quantity surveyor would rewrite the contract, changing it from a design-build to a build-only contract, transferring most of the risks to the employer. This should encourage the bidders to lower their prices. It worked.
Retendering took place with the new concept. The lowest bid was within the employer’s original budget. Construction began and the employer proudly announced this prestigious facility would be completed and made available to the people by the original opening date. When making this promise, the employer made no allowance for the time it took to redesign the facility, to redraft the project documents or to undertake the retendering process.
The trouble had only just begun.
As the employer’s original concept was a design-build project, the drawings were conceptual only, to be developed by the contractor’s design team. The employer’s decision to change to a build-only project meant the architect had to develop the detailed design and prepare the drawings necessary for the contractor to execute the works. As a result, there were not enough drawings available for the contractor to start building. Later, it was discovered that many of the redesigned areas of the building did not work. The architect had to correct its design and issue new drawings to the contractor.
As expected, the project works were severely delayed and numerous claims followed. The final project cost was almost three times the employer’s initial budget. Disputes were plentiful and the project was delivered to the people two years later than promised.
Careful planning by the employer, well-prepared project documents and prudent decisions regarding appropriate risk allocation are essential for the success of all construction projects.
The Tender (Bidding) Phase
Preparing and compiling tender documents, most of which will become an integral part of the contract, are central to the success of construction projects. Well-drafted documents are fundamental for preventing uncertainty, misunderstanding or misinterpretation – and, more importantly, for preventing disputes. Poorly prepared documents are a real cause of most construction disputes.
The documents provided by the employer at the tender (bidding) stage should, at the very least...