Model for Understanding, Preventing, and Resolving Project Disputes

Based on the comparative analysis of 24 construction disputes, this paper presents a process model that explains the development of disputes. The model examines the combined effect of project uncertainty, contract, working relations, and problem solving effectiveness on the development of disputes. The model develops a classification of problem situations, and identifies the problem-solving requirements and the potential for dispute in each situation. The model indicates that the prevention of complex, high cost disputes depends more on the planning and problem solving ability of the project organization, and less on the contractual terms. The paper identifies the following actions that can reduce the number and severity of claims: reduction of project uncertainty, reduction of contractual problems, reduction of opportunistic behavior, increased the project organization's problem-solving ability, and use of alternative dispute resolution methods to reduce resolution costs.     

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.     

Explaining Cooperative Behavior in Building and Civil Engineering Projects’ Claims Process: Interactive Effects of Outcome Favorability and Procedural Fairness

Cooperation is fundamental to successful procurement and delivery of building and civil engineering projects. This study explores the role of perceived fairness as a motivator of cooperative behavior in the process for administering project claims. The objective is to investigate how a contractor’s perceptions about fairness of the procedure for administering project claims would interact with the outcome received from the claims to influence the contractor’s cooperative behavior in terms of conflict intensity and potential to dispute. The data collection instrument was a structured questionnaire. Face-to-face interviews were conducted with 41 contractors’ personnel regarding their experience with claims on 41 completed projects in Singapore. The data were analyzed using the structural modeling approach. The results indicate that on projects where contractors did not receive a favorable outcome from claims, there was lower intensity of conflict and lower potential to dispute when contractors perceived that the procedure for administering the claims was fair than when the procedure was perceived to be unfair. The findings suggest that, in construction, cooperative behavior is a combined function of the outcome and procedure leading to that outcome. It also suggests that enhancing cooperative behavior goes beyond formal contract provisions but rather how the contract is administered in practice. It is recommended that employers’ project management team whose actions of rejecting invalid claims may be misinterpreted and disputed pay greater attention to how decisions on claims are reached. A fair procedure could cushion the effect of an unfavorable decision and thereby reduce a contractor’s uncooperative attitude.     

Study of Real Options with Exogenous Competitive Entry to Analyze Dispute Resolution Ladder Investments in Architecture, Engineering, and Construction Projects

Architecture, engineering, and construction industry participants often find it pragmatic to implement a project-specific dispute resolution ladder (DRL) as a managerial tool to assist in the prompt resolution of claims and change orders (CCOs) that might arise during the project construction phase. This project-specific DRL consists of a single or multiple alternative dispute resolution (ADR) techniques that require capital expenditures to cover the expenses incurred by the owner’s/contractor’s employees and third-party neutrals. If a project-specific DRL is properly chosen, then the capital expenditures are outweighed by the expected benefits from the DRL implementation; namely, prompt resolution of the CCOs without incurring excessive cost overruns on an already financially stressed project budget, as well as avoiding the escalation of the claims to a dispute that requires long protracted litigation for final settlement. Typically, the decision as to which ADR techniques to include in the project-specific DRL is undertaken during the project planning phase prior to the actual occurrence of the CCOs. In this case, the project owner decide to invest in a DRL in exchange for the expected savings in the project. This decision regarding the project-specific DRL is usually done based on the experience of the project parties with the ADR techniques. However, such a decision needs to be guided by a financial tool that allows the project owner to evaluate alternative DRLs and choose the most economically feasible alternative based on the project and ADR characteristics. In this paper, a financial model is developed to evaluate DRL implementations in construction projects by drawing analogies from real option theory with exogenous competitive entry. More specifically, the occurrence of a given CCO will result in a reduction in the value of expected savings in the project due to DRL implementation. This is similar to the reduction in the gross value of a capital investment project in a commercial property due to competitive entry by another similar commercial property developer in the market. At the same time, the CCO resolution due to an effective DRL implementation will allow project owner to recover part of the losses in the expected savings in the project due to the DRL implementation. The model presented in this paper takes into account the characteristics of the various ADR techniques included in the project-specific DRL, and the characteristics of the CCOs occurring during the construction phase of the project. A case study of a real construction project is used to illustrate the practical implementation of the model. The results indicate that for this case project and from a financial point of view, the investment in the chosen project-specific DRL was not worthwhile because of the high uncertainty in the project, and the low effectiveness of the selected DRL. These conditions did not provide the owner with the anticipated advantage of the DRL implementation in reducing the value of the CCOs occurring in the project. At the same time the cost of the DRL implementation exceeded the actual savings attained in the project.     

Hybrid Model Incorporating Real Options with Process Centric and System Dynamics Modeling to Assess Value of Investments in Alternative Dispute Resolution Techniques

Project-specific dispute resolution ladders (DRLs) are typically implemented in construction projects to resolve issues arising between the project participants. The DRL typically consists of single or multiple alternative dispute resolution (ADR) techniques to address construction issues at the three levels of escalation: conflicts; disputes; and claims. However, a DRL requires significant investments to cover the direct costs incurred in-house by the project participants or, externally, if construction specialists and lawyers are recruited to assist in the resolution. Thus, the benefits of the DRL implementation in a construction project must outweigh its costs for the implementation to be worthwhile. This paper presents a methodology to study the effect of different resolution strategies on the value of the investment in a DRL using option/real option theories from financial engineering, process centric modeling, and system dynamics methodology. Of particular interest in this paper is the integration of these research methodologies into a computer model to support the evaluation of the DRL investment in a particular construction project by taking into account the characteristics of (1) the project and (2) the different ADR techniques chosen for the DRL implementation. Finally, an example is presented to illustrate the application of the computer model in a real construction project. The results of the simulation serve two main purposes. First, the results of the simulation are used to verify the intended model behavior in terms of proper integration of the three methodologies (i.e., real options, process centric, and system dynamics) in one computer system. Second, the model application to a real construction project using actual project data illustrates the potential of the model in providing the project participants with information related to the expected number of claims and change orders resolved at each level of the DRL, the change in the expected savings during the construction phase, and finally the value of the investment from the perspective of the project owner.     

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.     

Quantification of Costs for Dispute Resolution Procedures in the Construction Industry

The extent to which disputes affect the construction industry has been well-documented. There are a plethora of anecdotal stories, and even some data that explain how unresolved conflict can impact project cost, schedule, and quality. In response, many systems and procedures have been developed to address disputes and their resolution within the construction industry. However, no data exist that quantitatively compare these various alternatives and the real costs of resolving a dispute using methods other than litigation. This paper presents a framework for identifying and capturing the transactional costs incurred to resolve disputes throughout the full spectrum of resolution options. Transactional cost data from 46 recently completed construction projects, totaling over $2 billion of total installed costs, confirm that these sums can account for a large portion of the settlement/award amount, the original claim amount, and even the total contract value when using some dispute resolution methods. Furthermore, using dispute trend and cost data, a comprehensive dispute management system based upon the concepts of risk management is proposed, highlighting the overriding objective of promoting dispute avoidance/resolution in the most cost-efficient manner possible.     

Mediation∕Arbitration: Alternative Dispute Resolution Process

Interest in alternative dispute resolution (ADR) techniques for the construction industry has grown in recent years. Traditional litigation has been criticized on several fronts. The traditional procedures are often cumbersome, expensive, and lengthy. The outcome of litigation is uncertain and often confusing. For certain cases, alternative procedures may be useful in quickly resolving disputes. Sometimes there is no alternative to litigation. Each case is unique, and the appropriate form of dispute resolution mechanism must be established for each project. This paper reviews the process of mediation∕arbitration, and compares that process to other alternative dispute resolution procedures.     

Alternative Dispute Resolution Techniques: Design Professional's Perspective

Alternative dispute resolution (ADR) techniques offer members of the design‐construct community the opportunity to resolve disputes without having to resort to expensive and lengthy litigation. Disputes inevitably arise because elements of the design‐construct process, such as contracts, specifications, and personnel, are not perfect. Even with a qualified project team that is dedicated to the construction of a quality project, some disputes will occur. Knowing this, a project team's primary objective should be to anticipate circumstances which might generate a dispute and to develop proactive strategies for dealing with such circumstances. When a dispute does occur, internal negotiation should be tried first. This process involves decision makers—those involved financially and those who understand the ultimate impacts of the dispute on the quality and long‐term success of the project. Lawyers should not actively participate in internal negotiation except as a last resort. If this process does not generate a settlement, mediation and arbitration should be tried before commencing litigation proceedings. ADR is an approach to dispute resolution that may be less expensive and time‐consuming, and is more likely to yield “win‐win” settlements than other dispute resolution techniques.     

Exploring the Potential for Predicting Project Dispute Resolution Satisfaction Using Logistic Regression

The success of a construction project depends on the coordinated efforts of project team members. This is especially crucial when a project is in dispute and hence the achievement of satisfactory project dispute resolution is critical to project success. This proposition has been empirically demonstrated a previous research that studied project dispute resolution satisfaction (DRS) using multivariate discriminant analysis (MDA). This paper reports on a study that builds on that research, with the specific aim of predicting project DRS through the use of logistic regression (LR). In this study, a LR model of project DRS (Model 1) is developed, and then compared with the MDA model. The findings suggest that the LR technique provides a higher hit rate and thus a higher proportion of correct classification. With the wider acceptance of the use of alternative dispute resolution (ADR) methods, the effect, on the LR model, of changing the demarcation between adverse and favorable project DRS is also examined. For this examination, another LR model (Model 2) was developed. It is believed that Model 2 may reflect the prevailing sentiment that ADR is viewed as an amicable way to resolve disputes. Both the MDA model and LR models (Model 1 and Model 2) indicated that “design changes” are the root cause of adverse project DRS. Within the scope of the project data, these findings suggest that design changes are not just disruptive to project progress but also a critical cause of construction disputes.     

Analytical Framework for the Choice of Dispute Resolution Methods in International Construction Projects Based on Risk Factors

International construction projects provide opportunities for developing countries to advance in the global economy and for international construction and design firms to increase their profit and market share. Despite the attractive opportunities that international construction offers, international contractors are faced with many challenges and difficulties when moving into international markets. Many risks are associated with international construction, whether external or project-specific risks. Those risks affect how contract clauses are written, including the dispute resolution clause. This paper discusses the different dispute resolution methods employed in international construction contracts and develops an analytical framework (DRM-Risk matrix) suggesting the use of specific dispute resolution methods depending on the risks expected in the project. The matrix may eventually help international contractors in the selection of the appropriate dispute resolution method during contract formation depending on the risks involved in a project.     

Dynamic Conflict Management in Large-Scale Design and Construction Projects

The construction industry plays a major role in both the economy and infrastructure project delivery worldwide. However, one major critical characteristic of the construction industry is the high cost incurred by the resolution of arising conflicts in projects. As a result, project managers are seeking ways to avoid conflicts and resolve them effectively and equitably when they happen. This paper discusses the dynamic nature of conflicts in terms of their evolution and escalation within a project and the interaction between conflicts and dispute avoidance and resolution techniques (DART). The paper also presents the background and development of a conflict management system, entitled the DART Simulator (DART-S). The intent of the DART-S is to provide project managers with a comprehensive and integrated approach to evaluate the impact of a DART implementation on the reduction of conflicts. The simulator was built using a system dynamic modeling within a visual simulation environment. The core of the simulator was developed by using data from literature on the nature of conflicts, dispute resolution processes, and the potential effectiveness of 46 different DART-S on conflict avoidance and resolution. The simulator was then tested and verified with a case study comparing the traditional two-step dispute resolution process with a five-step dispute resolution process. The results of this comparison clearly show that the five-step dispute resolution process is able to decrease the initial number of conflicts of a project, reduce the number of conflicts which may escalate to a higher step in the resolution process, and provide resolutions of conflicts before they reach litigation. By quantifying the amount of conflicts, evaluating the evolution of conflicts, and assessing the impact of DART implementation on conflict escalation, the DART-S provides project managers with an integrated strategy for conflict management.     

Contractual Approach for Facilitating the Resolution of Dispute over a Contractor’s Failure to Comply with Time Limit for Notice of Delays

The enforcement of a contractor’s notice of delays and claims as “a condition precedent” to a contractor’s claims is a controversial issue among practitioners, researchers, and legal scholars. Strict enforcement or liberal interpretations (no enforcement) of time limit for a contractor’s notice have some implications for the success of projects and for the construction industry. This paper examines and compares the different views regarding enforceability of notice provisions. The paper evaluates those views and thereafter proposes an alternative contractual approach for dealing with a contractor’s noncompliance with the provision. The applicability of the proposed approach is evaluated vis-à-vis legal principles. The proposed approach appears to be practical and equitable. It could facilitate early resolution of disputes relating to notice. It could also make the outcome of notice-related dispute more predictable. Considering the contractual, legal, and practical problems that could arise from a strict enforcement and a liberal interpretation (no enforcement) of time limit for a contractor’s notice, the paper highlights the benefits of the proposed approach to the employers (project owners), contractors, and the construction industry at large.     

Multiple Device Collaborative and Real Time Analysis System for Project Management in Civil Engineering

Complexity in civil engineering projects has increased over the years, which has led to an increase in the number of organizations involved in those projects. In today’s environment, these organizations operate in different parts of the world requiring their personnel to be geographically distributed. However, current project management practices require project personnel to be geographically collocated and, thus, are unable to provide the infrastructure to support geographically distributed project management teams. In addition, current project management practices require access to personal computer (PC) based resources for project information, which is not always a feasible alternative for on-site project personnel, as it requires certain hardware and office configurations. Thus, alternatives to PC-based resources such as personal digital assistants (PDA) or phones are needed for information access. Moreover, once project information has been conveyed to all project personnel, the system should aid them in terms of providing data analysis tools and presenting technical or management solutions to the problems encountered by the project personnel. This paper presents a collaborative project management system with a knowledge repository, analysis resources, and multiple device access to support the infrastructure of distributed project management teams in complex architecture/engineering/construction projects. The primary goal for such a system would be to provide a platform where project information can be effectively shared with any of the project management personnel from anywhere and with a very few limitations on the computing device.     

Project Dispute Resolution Satisfaction Classification through Neural Network

This paper presents an artificial neural network technique of analysis in determining the important factors affecting the outcome of construction dispute resolution processes in Hong Kong. Projects were classified as Favorable or Adverse in terms of Dispute Resolution Satisfaction in accordance with conventional professional practice for deciding on which disputes get resolved. The necessary historical project data sets were collected through structured interview and questionnaire surveys to provide the training details for the building of a Multi-Layer Perceptron artificial neural network. The preliminary analyses conducted indicated that resolution outcome depends on a combination of factors, namely, environment-, organization-, project-, and process-specific. The refinements to the network were achieved through reduction of the numbers of variables and processing elements. Verification of the “Best” network was achieved through the running of a batch function for stabilization. The optimal network so produced was applied to unseen data and achieved a 100% correct testing result for adverse DRS projects. The optimal network also identified design changes as the most critical factor, indicating that projects with a high degree of design changes were more likely to result in dispute requiring the service of alternative dispute resolution techniques or formalized proceedings.     

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.     

Consultants’ Perceptions on Construction Delay Analysis Methodologies

Resolving the delay claims that usually trail delayed completion of construction projects is beset with immense difficulties that often lead to disputes between the parties involved. The research reported in this paper is a part of a wider study aimed at developing a framework for reducing the attendant disputes and aiding cost-efficient dispute resolution. The focus of the part reported here is owner consultants’ perceptions on existing methodologies for analyzing project delay. Based on a survey of U.K. construction consulting organizations, the study examined, among others, the awareness and use of these methodologies, their perceived reliability, expert involvement, and obstacles to their use. The main study findings are: (i) delay analysis is a multidisciplinary task, with the project quantity surveyor often playing the leading role on the owner’s side; (ii) the simpler methodologies are used more often than the complex ones although the former are known to be less reliable than the latter; and (iii) the principal obstacles to the use of the sophisticated methodologies are: lack of adequate project information, the use of programmes not in CPM network form, and poorly updated programmes. It is thus argued that improvement in current programming and record-keeping practices will promote the use of the more reliable methodologies which, in turn, will facilitate smoother resolution of delay claims.     

Global Legal Issues for Engineers and Constructors

When performing engineering and construction (E&C) throughout the world E&C personnel need to be aware of the differences in legal systems and how contracts are enforced in different countries. This paper provides information on some of the international legal conventions, regional legal issues, and comparative legal systems. Next the paper addresses international engineering and construction contracts by providing a discussion on the clauses that could differ in contracts throughout the world and which clauses are important to include in international contracts. Specific contract clauses are examined in relation to how their inclusion or exclusion might impact global engineering and construction projects. The next section presents issues related to claims and change orders along with a brief discussion of dispute resolution techniques including international arbitration and contract clauses related to dispute resolution techniques. Anticorruption legislation is mentioned along with kidnapping and ransom insurance because both of these issues are increasing in importance in the global E&C arena. Liability issues that firms might face in the global E&C marketplace are explained along with risks associated with currency valuations and local labor conditions. A table of clauses pertinent to global E&C contracts is provided to help firms prepare for projects in foreign nations.     

Building a framework for two internal organizational approaches to resolving and preventing workplace bullying: Alternative dispute resolution and training.

Workplace bullying is behavior that threatens, intimidates, humiliates, or isolates people at work, or undermines their reputation or job performance. Moving beyond research, academics and employment practitioners are beginning to address the need to design and implement organizational antibullying policies, training, conflict management programs and systems, and possibly, antibullying public policy and legislation. Consultants will play a key role in helping organizations develop and implement internal organizational programs. In this paper the authors describe alternative dispute resolution systems and workplace training. Key objectives include arriving at a clear definition of workplace bullying, fostering individual, organizational, and societal awareness of the prevalence and consequences of workplace bullying; and providing specific guidance and mechanisms for individuals, managers, human resource departments, corporate leadership, union representatives, attorneys, physicians, counselors, psychologists, and psychiatrists, for preventing and handling bullying incidents. (PsycINFO Database Record (c) 2010 APA, all rights reserved)     

浅探财务人员参与企业基本建设投资项目全过程管理的必要性

从财务管理在企业管理中的中心地位和促进财务管理专业一其它专业之间的交流，充分发挥管理职能、实现高效财务监督、控制、及把财务人员锻炼培养养成复合型人才等方面，较深入地探讨了财务人员参与基建投资项目全过程管理的必要性。