Insight into Resolving Construction Disputes by Mediation/Adjudication in Hong Kong

Resolving construction disputes using an adversarial approach is considered to be in opposition of the maintenance of a harmonious relationship between two parties. The modern arbitration process may emulate the litigation proceeding leading to delay and cost escalation. During the past decade, the Hong Kong Government has implemented a mediation clause as an alternative mode for settlement of construction disputes. In this paper, the experience and insight into resolving construction disputes by integrating mediation and then arbitration in Hong Kong are highlighted. The state-of-the-art modern mediation process and its philosophical origins are reviewed. The shortcomings of the present system are pinpointed. The success of the adjudication now practiced in the United Kingdom may suggest that there is a place for another process of dispute resolution, which may help improve the situation. The prospect of the proposed mediation/adjudication and then arbitration mechanism is discussed with particular reference to the construction industry in Hong Kong.     

United Kingdom Construction Claims: Views of Professionals

A novel approach has been used to attempt to understand how contractors justify their claims on construction contracts and how contract administrators are likely to assess them. This is done by encapsulating particular claim types into scenarios and interviewing not only contractors and contract administrators, but also claims consultants, to hear their views on how the situations represented by the scenarios should be resolved. In this paper, four areas of general uncertainty surrounding claims in the United Kingdom are described and the results of the survey on these four areas are reported. The concerns addressed are: the treatment of exceptionally adverse weather; dealing with early completion schedules; quantification of the prolongation costs associated with an approved extension of time; and concurrent delays. The results show some good agreement, particularly on the problems of dealing with exceptionally adverse weather and with some aspects of concurrent delay assessment. Although the consensus was not so clear on the other two issues, there was a majority view that should give professionals working in this area greater confidence when dealing with these problems.     

MAUT-Based Dispute Resolution Selection Model Prototype for International Construction Projects

Disputes are common in international projects because of contractual, cultural, and legal factors. The dispute resolution methods currently adopted in international projects are varying, including litigation, arbitration, adjudication, mediation, expert-determination, dispute resolution board, and minitrial. The problem in question is on how to select the most appropriate resolution method that can fit nicely in the nature of the dispute and the disputing parties’ needs. A dispute resolution selection prototype (Model) based on the analytical hierarchy process and multiattribute utility technique (MAUT) is presented in this paper. The Model developed consists of five components: Selection factors, dispute resolution methods, utility factors, relative importance weightings, and user’s preferred weightings. These were based on the quantitative data provided by 41 experts in the field, who were barristers, arbitrators, mediators, and project managers. The Model is considered beneficial to the industry, as it provides construction professionals with a systematic and objective approach in the management of international project disputes.     

Settlement of Construction Jurisdictional Disputes

Jurisdictional disputes in the construction industry have long been a source of lost productivity. While dispute causes have been documented else‐where, the mechanisms for resolving disputes are explored here. Two alternatives are possible, namely: (1) The National Labor Relations Board; and (2) the Impartial Jurisdictional Disputes Board. For each approach, the organization, resolution process, appeal and injunctive relief opportunities, decision time frame, and decision criteria are documented. The two approaches are compared, and the advantages and disadvantages for each are cited. These assertions are based upon interviews and questionnaires. More than 60 industry and union officials participated. It is concluded that a voluntary procedure is highly desirable. The major barriers to developing a satisfactory procedure are: (1) Decision criteria; (2) enforcement authority; (3) contractor stipulation; and (4) scope of application. By far, the most difficult issue is that of decision criteria. The unions want the primary criterion to be past agreements of record and established trade practices. Contractors want more emphasis on efficiency and good management practices. It is concluded that unless this issue is resolved, no voluntary procedure will be satisfactory.     

Progress of Statutory Adjudication as a Means of Resolving Disputes in Construction in the United Kingdom

This paper reports on a longitudinal study on the progress of statutory adjudication in the United Kingdom since its commencement in 1998. This study was carried out by the Adjudication Reporting Centre at Glasgow Caledonian University and it considers the statistical data provided by both Adjudicator Nominating Bodies and adjudicators themselves. Various trends are shown and reasons explored. These trends include the growth in adjudication referrals, numbers of adjudicators, causes of disputes, sums of money in dispute, seasonal trends, monitoring of adjudicators’ performance, procedures adopted, time limits, fees, etc. There is evidence that the disputes, while still predominantly about payment and valuation issues, are becoming larger and more complex. The impact of statutory adjudication on other forms of dispute resolution is considered.     

Adjudication outside Construction, Adjudication for Consumer Disputes

Adjudication is increasingly seen as the preferred means of resolving many construction and consumer disputes. As one party in dispute observed in a personal communication to the writer “It is a forum to finally express my woes. One can often feel helpless . . . in this situation and the process of adjudication has proved cathartic.” However, the differences between construction adjudication and consumer adjudication are not often understood or appreciated. This paper, first, explores some of those differences using, as an illustration of consumer adjudication, the Communications and Internet Services Scheme (CISAS) administered by IDRS Ltd. for the Chartered Institute of Arbitrators and approved by the Office of Communication which is the regulator for the U.K. telecommunications and Internet industry. Second, it looks forward to how the advantages of both may be combined to produce more effective dispute resolution with consistently high standards for resolving differences between parties, ensuring disputes are always effectively and efficiently investigated while streamlining procedures so that they are easy to use, transparent, and cost effective.     

Avoiding and Mitigating Delay and Disruption Claims Conflict: Role of Precontract Negotiation

Delay and disruption claims often generate conflict and contract dispute in the delivery of building and civil engineering projects. If construction delay claims conflict can be avoided or mitigated, there could be substantial financial savings on projects. This study explores the effect of precontract negotiation as a means of avoiding or mitigating delay and disruption claims conflict. The data collection instrument was a structured questionnaire administered face to face on 41 contractors’ personnel on 41 completed projects in Singapore. The data were analyzed using structural modeling with partial least squares estimation approach. The results indicate that when the contractors received an unfavorable outcome from the contract administrator’s decision on their claims for delay, the intensity of conflict was lower when there was precontract negotiation and precontract agreement regarding the rules for quantifying and assessing the impact of anticipated delays than when there was none. It was also discovered that the higher the level of precontract negotiation and precontract agreement on the rules for quantifying and assessing delays, the higher the contractors perceived the quality of the decision-making process for delay claims during the construction phase. Further, the higher the contractors perceived the quality of the decision-making process for delay claims, the lower the intensity of conflict. At the time of entering into contracts, owners and their project management team need to pay more attention to precontract negotiation and agreement with their contractor to clarify and agree on the rules for quantifying and assessing the impact of anticipated delay and disruption. Aspects that require precontract negotiation, agreement, and clarification include: the rules of evidence for claims, the record requirements for claims and the procedure for keeping the records, form of construction program including the software for the preparation of the program and the procedure updating the program, the methodology for analyzing delay claims, formula for quantifying unabsorbed head office overhead component of prolongation cost, the method for quantifying disruption cost, the handling of concurrent delays, profit—whether claimable and the rate of profit to be paid, acceleration—circumstances under which it will be compensated and basis of compensation, and the question of who owns the float. These are, typically, not adequately covered by most standard forms of contracts. The agreements on these matters may be incorporated as part of partnering agreement or as a supplement to the contract agreement. Precontract negotiation, clarity, and agreements could produce instrumental and noninstrumental (social psychological) effects, which could facilitate delay and disruption claims assessment and their resolution. It could mitigate conflict even when the outcomes are unfavorable to a party.     

Developing Case-Based Communities of Practice for Teaching the Legal Aspects of Construction: Lessons Learned in Taiwan

To enhance the learning for graduate students to understand legal issues and dispute resolution in the construction industry, students can be provided with a learning platform for exchanging and sharing knowledge and experience among students and experienced instructors. With the assistance of the Internet, construction law related experiences acquired from previous projects can be discussed and shared with students. This study utilizes the case-based communities of practice approach to capture and manage engineer experiences. Via the case-based communities of practice approach, students and instructors can exchange and share discussions and comments related to selected topics and cases. The proposed case-based communities of practice learning (CCPL) system was developed and demonstrated to be effective when applied to teach students about construction law at a university in Taiwan. Construction law related experiences can be taught and shared among students, thus enhancing students’ abilities to resolve problems and disputes related to construction law. The combined results of various case studies demonstrate that the application of the CCPL system to the legal aspects of construction courses offers an effective means of sharing practical legal knowledge and experience, especially among graduate students who lack previous legal experience.     

Conflict Resolution in Construction Disputes Using the Graph Model

A formal approach is presented for systematically resolving construction conflicts. Using an actual case study, a decision support system based on the graph model for conflict resolution (GMCR II), is employed to effectively investigate the strategic interactions that took place between an owner and a general contractor concerning the financing of a construction project. The conflict analysis process considers the decision participants, their decision options, and their relative preferences when modeling the dispute. GMCR II is then used to perform an in-depth stability analysis in order to ascertain the possible compromise resolutions or equilibria. In the case study, GMCR II correctly predicts the sequence of decisions that took place in the dispute and furnishes an array of useful strategic insights about the conflict. Moreover, a sensitivity analysis is executed to determine how changes in preferences can affect the equilibrium results. This conflict resolution procedure is useful for both researchers and practitioners to better deal with the dispute-prone nature of the construction industry.     

Impact of the EU Mediation Directive on the German Construction Sector

The European Union (EU) Mediation Directive of 2008 has to be transposed into German law by 2011. German law already complies with the Directive to a large extent. The only action that needs to be taken concerns the loosely defined obligations regarding the quality of mediation and the mediator’s right to refuse to give evidence. In both cases, only the law governing cross-border disputes needs to be amended. Nevertheless, it is likely that the Directive will have a significant impact on the German construction sector. In terms of cross-border disputes, German companies involved in other EU member states will feel the impact directly because the Directive makes mediation more effective by creating a consistent European framework that provides a balanced relationship between mediation and judicial proceedings. In terms of domestic mediations, the impacts of the Directive will be more indirect. The German lawmaker is likely to go beyond the requirements set out in the Directive, at least by applying the new rules to both cross-border and domestic mediations, but perhaps even by introducing incentives for mediation which are not required by the Directive.     

Consistency and Reliability of Construction Arbitration Decisions: Empirical Study

While construction arbitration is analyzed in a plethora of information, there is a paucity of hard data about the consistency and reliability of the construction arbitration decision. The assumption that an industry familiar adjudicator will provide a reliable and consistent decision in comparison with the expectation of the industry as a whole has not been tested. This paper presents the results of a study on the reliability and consistency of construction arbitration through the examination of a variety of arbitrators’ decisions on the same construction dispute scenario. Data was collected from attorneys, owners, owner representatives, contractors, and subcontractors. Compilation of the survey results finds little consistency in the arbitrator’s awards, but with much thoughtful care in award consideration. The results suggest that the arbitrator’s industry background does not influence the arbitrator’s award. There is also no significant award bias due to the arbitrator’s education level or years spent in construction business. The results also indicate that previous arbitration experience does not predict the award outcome. This paper concludes that construction arbitration is wholly unpredictable. However, the result will be a well-reasoned and unbiased decision.     

Risk Index Model for Minimizing Environmental Disputes in Construction

Although the number of environment-related disputes is increasing, no risk management approach exists to minimize such disputes at construction sites. The purpose of this study was to develop an environmental risk index model for general contractors to minimize third-party environmental disputes at construction sites. The analytic hierarchy process is used to weigh and calculate an environmental risk index. A case study demonstrated how to apply this model for risk evaluation, on-site monitoring, and environmental management, whereas a comparative analysis revealed that the model decreased the number of disputes to some degree at sites where it was used. This model makes it possible to minimize environmental disputes in the field effectively.     

Arbitral Tribunal Proceedings Case Study: Egyptian Large-Scale Construction Project

This paper investigates how arbitration is used as a dispute resolution mechanism in Egyptian large scale construction projects and what are the types of issues that construction professionals should address when they encounter claims in the Egyptian construction market. To meet the goals and objectives of this study, a research project was conducted to study the arbitration process for a dispute that was in excess of $31 million, which arose out as a result of the proceeds of a large-scale project with an original contact price of $85 million that was constructed in Cairo, Egypt. This research project analytically investigated the background of the conflicts, the arbitral proceedings, and the award issued by the arbitral tribunal. Based on such thorough study, it was concluded that arbitration did not provide a timely and cost-effective resolution for the said dispute. Moreover, the same study has raised questions in relation to the overall management of megaconstruction projects in Egypt namely: (1) the impartiality of project managers; (2) the magnitude of change orders and consequent delays; (3) the magnitude of claimed amounts; and (4) the level of management and administration of claims and disputes. It is perceived that this paper would trigger professionals to think of other suitable dispute resolution mechanisms, such as dispute review boards, for settlement of claims arising from Egyptian large scale construction projects. Furthermore, this study would be of value for contractors and owners who intend to work in the Egyptian construction market.     

Baseline Determination in Construction Labor Productivity-Loss Claims

Various ways of quantifying damages have been applied to productivity loss claims in construction. All of the ways attempt to be as objective as possible based on the extent of information available in a particular case. The measured mile, a widely accepted method, is employed when an unimpacted baseline period of production can be identified. Although that approach is considered to be the most objective method available in such cases, the method is limited and does not directly account for variation in individual productivity values about a normal or natural level of productivity. A gap exists between the use of existing methods and the availability of an appropriate methodology that specifically addresses variation in productivity. The key lies in the way baseline productivity is measured, which is inherently statistical, yet no truly statistical methods are used to establish such a baseline. Using the measured mile as a backdrop, this article provides an objective, measurement-based approach that can be used to establish a productivity baseline applied to construction productivity loss claims, based on the application of statistical methods aided by a process control chart. The focus is on providing the basic principles and concepts underlying the approach presented.     

Here Comes the Judge—Duties and Responsibilities of Design Professionals When Deciding Disputes

Frequently during the progression of a construction project, the design professional is forced into the role of a judge of project disputes between the owner and contractor. These disputes generally involve substantial claims for extra compensation or extra time and have significant impact on the owner and contractor’s financial position on the project. The architect or engineer will be pressured by the owner, who controls whether the design professional gets paid. The contractor, however, may threaten to pursue legal claims against design professionals if they make the contractor’s job more expensive or fail to give it the appropriate time extension. In many cases, design professionals must admit or deny whether their services were defective in some nature. In addition to these pressures, the design professional is not necessarily trained or comfortable with acting as a judge and interpreting the meaning of contract terms. Generally, when an architect or engineer performs this judicial function, they are immune from any liability for the results of decisions. However, the design professional must make the decision in good faith and with impartiality. In addition, design professionals must only decide those matters that their contract obligates design professionals to decide. This paper will address the nature of the designer’s role as judge and the limits of the designer’s immunity with respect to the designer’s contract obligations and good faith and impartiality requirements.     

Empirical Assessment of Internationalization Strategies for Small and Medium Construction Companies

In the wake of increased globalization, more small and medium construction companies (SMCCs) are expanding into the global market. However, the international construction industry is different from the domestic with respect to resource, regulations, culture, entry strategies, and risk levels among other factors. This paper explores various ways and modes of internationalization for SMCCs under 13 key hypotheses that are relevant to the issues of internationalization from the perspective of SMCCs. To verify these hypotheses, this study used actual data from 560 cases of SMCCs’ overseas projects performed between 1990 and 2007. It was found that SMCCs’ entry scheme as prime contractors was more rewarding than in the case of subcontractors. Moreover, SMCCs are likely to evolve from subcontractors engaged with home-country contractors to subcontractors engaged with foreign contractors. Also, cultural distance is positively related to performance, but the effects of cultural properties are not as strong compared to the international manufacturing industry. The results are expected to help SMCCs build internationalization strategies by determining promising entry modes, proposing possible evolutionary paths to enter overseas projects, and assessing cultural effects in reference to SMCCs’ successful performance.     

Disputes and Dispute Resolution Systems in Sino-Foreign Joint Venture Construction Projects in China

There has been a sharp increase in the number of Sino-Foreign Joint Venture (SFJV) construction projects in the People’s Republic of China since the 1990s. Despite the Chinese Government’s new measures for boosting foreign involvements, entering into the construction market remains problematic for many foreign contractors. One of the problems concerns construction disputes. In light of this, this paper reports a study on disputes and dispute resolution systems in SFJVs. A questionnaire survey of 41 practitioners in the field was carried out. The main purpose was to identify the most common sources of disputes and the most commonly used dispute resolution methods in SFJVs. Results show that the sources of construction disputes can be classified into three categories: contractual, cultural, and legal matters. The most commonly used dispute resolution methods are mediation and arbitration. These findings will give both Chinese and foreign contractors invaluable insights into disputes and dispute resolution systems in SFJV projects.     

International Construction Dispute Adjudication under International Federation of Consulting Engineers Conditions of Contract and the Dispute Adjudication Board

The role of institutional arbitration has become significantly less commercially viable in the international construction industry as a primary means of dispute resolution because of the uniqueness of the construction process. As a result, the construction industry has developed an innovative form of primary dispute adjudication called the Dispute Adjudication Board (DAB). This paper will show the need for an efficient dispute resolution process because of the globalization of the construction industry. It will focus on the standard contract forms of the Féderation Internationale des Ingénieures-Conseils (International Federation of Consulting Engineers) (FIDIC), which are widely used in international construction projects. The paper will then discuss recent developments in the FIDIC, including the development of the DAB to address the fundamental need for a commercially viable means of construction dispute adjudication.     

Mediation for Public Construction Contracts under the GPA in Taiwan

The purpose of this paper is to examine mediation for public construction contracts under the Government Procurement Act (GPA) in Taiwan. The World Trade Organization Committee on Government Procurement, on December 9, 2008, adopted a decision that invites Taiwan to accede to the plurilateral agreement. Government procurement accounts for in the range of 15–20% of gross domestic product, on average, in developed countries. At the same time, the number of disputant cases over public construction contracts reached 70% of contract disputes under GPA between January and March in 2009 according to the official statistical information of Taiwan. In recent years, there are specific measures of the dispute settlement mechanism, especially in mediation under GPA, to be enacted and implemented. As the growing attention given to the Agreement of Government Procurement in Taiwan, the dispute settlement mechanism regarding government procurement has become an important issue. Therefore, this paper probes into the developments of mediation for public construction contracts under Taiwan’s government procurement. It is hoped that the discussion of the study will help the reforms of the dispute settlement mechanism of government procurement in Taiwan and also be beneficial for both Taiwan and international contractors.