Analysis of Dispute Review Boards Application in U.S. Construction Projects from 1975 to 2007

Since their first successful implementation in 1975, dispute review boards (DRBs) gained popularity as a standing neutral alternative dispute resolution (ADR) technique, and were implemented on a number of high profile construction projects in the United States and worldwide. The purpose of this study is to present a review, trend analysis, and classification of U.S. construction projects that had DRBs for the period of 1975–2007. Thus, a total of 1,042 U.S. construction projects that had DRB as part of their contract provisions are extracted from the Dispute Review Board Foundation database and are analyzed. The results of this study are presented in two major sections. In the first section, results of trend analysis are reported as growth in number of projects with DRB since 1975, as well as the distribution of these projects in terms of construction type (i.e., building, highway, and tunnel), and construction volume category. On the other hand, the second section includes the results of the analysis undertaken to study the mechanics of DRB application in construction projects. In this context, the effectiveness of DRB as a preventive measure against the escalation of conflicts to disputes is first studied. For those projects that had disputes heard by a DRB panel, the data was further analyzed to determine the effectiveness of the DRB as an ADR technique that can help in the resolution of a dispute at the project level without further escalation to arbitration or litigation. The results of the study indicate that DRBs have been successfully implemented in all three construction sectors in the United States. The effectiveness of DRB as a prevention technique was observed on approximately 50% of the 810 projects where no disputes were ever heard through a DRB panel formal hearing. For the remaining 50% of the projects, the effectiveness of DRB as an ADR technique was found to exceed 90% when comparing the number of disputes that were settled due to DRB recommendation to those that were actually heard during a DRB hearing session. Finally, the paper concludes with a set of questions and hypotheses that may be undertaken to explain the recorded observations, and set the way for future research efforts in this area.     

Evolution of Statutory Adjudication as a Form of Dispute Resolution in the U.K. Construction Industry

This paper reports on the rapid growth in the use of this form of dispute resolution and its apparent decline. It considers how this novel form of dispute resolution has changed in nature from its original limited role of providing a speedy and inexpensive process of resolving disputes so that cash could flow in the industry and be of help primarily to those in the lower reaches of the subcontracting chain into a highly developed legal process which has increasingly been utilized for large and contractually complex disputes. Statutory adjudication is still used extensively in the U.K. construction industry as the method of choice to resolve disputes, many of which would previously have gone to court or to arbitration. Data for this study were provided by the Adjudication Reporting Center at Glasgow Caledonian University.     

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.     

Case for Expanding the Claim Dispute Resolution Training of TxDOT Personnel

Texas Department of Transportation (TxDOT) currently uses general alternative dispute resolution and dispute management tactics to resolve construction claims. The successful application by TxDOT of project partnering methods, critical path management, and the Contract Claims Committee has resulted in a relatively low number of claims filed. However, one weakness in TxDOT’s current methodology is the lack of specific protocol for project-level personnel and administrators. The following survey of TxDOT dispute resolution methods emphasizes the importance of developing a personnel training catalog for Area Engineers in order to avoid costly claim dispute escalation. As the individual primarily responsible for resolving project and district-level disputes, the Area Engineer should be equipped with dispute resolution training if TxDOT wishes to improve the efficiency of its alternative dispute resolution protocol.     

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.     

Legal Framework for Alternative Dispute Resolution: Examination of the Singapore National Legal System for Arbitration

Effectiveness of any alternative dispute resolution (ADR) method depends on the national legal system to which it is subjected. In Singapore, the increasing growth in the use of ADR methods may be adduced to developments in the Singapore legal environment. This paper reviews the characteristics of the Singapore national legal system for arbitration. It examines how the legal system facilitates effective use of ADR. By its features, the Singapore national legal system ensures parties’ autonomy but deters parties from taking opportunistic advantage of the voluntary nature of ADR. It enables procedural flexibility, and confidentiality of arbitration proceedings. It insulates the arbitration process from intervention from the Singapore courts and from corruption; and it provides maximum judicial support in the arbitral process. Hence, it ensures that disputes can be brought to a conclusion within a reasonable amount of time, at a reasonable cost, as well as preserving business relationships. The Singapore legal system insures the integrity of arbitration and the independence of arbitrators and arbitral institutions by immunity provisions. In addition, the legal system enhances the use of mediation and conciliation in a sequential tier with arbitration by providing a time limit for mediation or conciliation to terminate should they fail to produce a mutually acceptable settlement. In Singapore, the court system is generally known to be efficient; hence, ADR faces the practical challenge of becoming lengthier than court proceedings. The continuing search for and use of expedited arbitration procedures by arbitral institutions such as the Singapore International Arbitration Centre should reduce this challenge. This paper provides useful information on how a national legal system may be designed to support the use of ADR methods and facilitate their effectiveness.     

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.     

Moderating Effect of Equity Sensitivity on Behavior-Outcome Relationships in Construction Dispute Negotiation

This study builds on Adam’s equity theory by examining the moderating effects of equity sensitivity (i.e., a person’s perception of what is equitable or inequitable) on behavior-outcome relationships among negotiators in construction dispute negotiation. First, an equity sensitivity construct is developed. This construct reveals that most construction negotiators are entitleds, also known as “takers,” at the negotiation table. Moderated multiple regression (MMR) is used to test the moderating effects of equity sensitivity. The MMR models affirm that the nature of behavior-outcome relationships varies, depending on the perception of equity. An entitled construction negotiator is found to be a versatile moderator who fosters satisfactory negotiation outcomes. The models show that negotiators are able to predict inequitable responses and to take measures to forestall or deal with different inequitable situations. This study indicates the merit of further study of equity theory in the context of construction dispute negotiation. Future challenges in this area include the examination of the equity restoration responses of negotiators to create an equitable environment.     

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.     

Adjudication: Temporary Binding and Tiered Dispute Resolution in Construction and Engineering: Hong Kong Experience

Hong Kong (under the “One Country Two Systems” Policy, Hong Kong, although an administrative region of the PRC operates a separate legal system, whose roots lie in the English common law system) has a justified reputation for being at the forefront of developments in techniques to avoid and resolve disputes in the construction industry. [This is illustrated by the adoption of the UNITRCAL Model Law by the Arbitration (Amendment) Ordinance 1996, specific powers given to Arbitral Tribunals under the Arbitration Ordinance (Cap. 341) including powers to consolidate, and the development of the dispute resolution adviser system. See the genesis, development and future use of the dispute resolution adviser system by Colin J Wall, Hong Kong Society of Construction Law dated November 17, 2004]. However, it has not, to date, seen the widespread adoption of adjudication as a means of resolving disputes. This article examines the history of the use of adjudication in Hong Kong, current trends, and offers some possible reasons for the limited adoption of adjudication.     

Marketing Practices of U.S. Contractors

The construction industry possesses characteristics of the production and service industries. This uniqueness requires marketing practices tailored specifically to match the construction market. A questionnaire survey of 65 U.S. contractors was conducted to determine the extent to which they are implementing a modified marketing mix theory that is compatible with the construction industry. The modified marketing mix theory recommends that contractors confront marketing from five perspectives, known as the five P’s of marketing: product, price, promotion, place, and people. This study showed that the five P’s of marketing are used by U.S. contractors in this decreasing order: product, price, place, promotion, and people. According to the survey results, U.S. contractors allocate about 1.5% of their annual revenue to marketing, but they may be spending more than they report. There seem to be only few differences between contractors that negotiate their contracts versus contractors who competitively bid their contracts, larger versus smaller companies, and contractors with a higher success rate in getting new contract awards versus contractors with a lower success rate.     

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.     

Legal Impact and Dispute Resolution of Disaster in Taiwan: Lessons Learned from Typhoon Aere

The combination of a natural disaster and human ignorance, such as Hurricane Katrina in New Orleans, can incur enormous property damage and loss of life. In August 2004, Typhoon Aere hit Taiwan and flooded over one-third of Sanchung City, in Taipei County. The attempt by a contractor to save New Taiwan Dollar 1,000 (about United States Dollar 30) resulted in enormous loss of property and as many as 18,941 claims. This case study examines the following possibility of tort claims, criminal charges, and administrative action in Taiwan. Alternative dispute-resolution (ADR) methods and processing proposition of disasters would be other issues discussed in this paper. The catastrophe revealed how government agencies and contractors deal with victims and restore order to society. Years of research expose that an integration of various dispute-resolution methods is constructive to achieve favorable outcomes, and a stepwise approach consisting of ADR methods is effective in resolving disputes after Typhoon Aere as well.     

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.     

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.     

Adjudication in the United Kingdom: Constitutional Implications

Good ideas are often overtaken by great events. That happened to adjudication. Originally envisaged as a single concept applying across the United Kingdom, it has been overtaken by more significant constitutional change. This paper takes a look at that process. Something of a parallel could perhaps be drawn with the individual states in the United States each introducing a similar form of legislation. The possibility exists, of course, of each area adopting a different approach but the indications are that certain communality is developing in adjudication and it is, perhaps, a measure of the success of the concept of adjudication that it is being voluntarily adopted in other dependency areas such as the Isle of Man.     

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.     

Procedural Preferences in Alternative Dispute Resolution: A Closer, Modern Look at an Old Idea.

This article reports 3 experiments that elaborate on previous research regarding preferences for alternative dispute resolution procedures for the resolution of legal disputes. Preferences for decision control, process control, and control over the choice of substantive rules used in the resolution process were examined. The moderating effects of social status (equal vs. lower status relative to the other disputant) and role (defendant vs. plaintiff) were also assessed. Relative preferences for 2 common types of mediation--evaluative versus facilitative--were also investigated. Participants generally preferred the following: (a) control over outcome, such that a neutral 3rd party would help disputants reach a mutually satisfactory resolution; (b) control over process such that disputants would relay information on their own behalf without the help of a representative; and (c) either substantive rules that disputants would have agreed to before the resolution process, or the rules typically used in court. Preference strength was moderated by experimental condition. Results suggest that mediation was the most preferred procedure and facilitative mediation was generally preferred over evaluative mediation. Implications for law and policy are discussed. (PsycINFO Database Record (c) 2010 APA, all rights reserved)     

Partial Factor Productivity and Equipment Technology Change at Activity Level in U.S. Construction Industry

Despite a decrease in industry level measures in construction productivity, there has been a steady increase in construction productivity at the activity level. This research examines equipment technology as one factor that may explain that increase. The relationship between changes in equipment technology and partial factor productivity is examined for 200 activities over a 22 year time period. Specifically, the paper examines the relative impact of different types of equipment technology for five technology factors: energy, control, functional range, information processing, and ergonomics. Through ANOVA and regression analyses, it is found that activities that experienced a significant change in equipment technology also witnessed substantially greater long-term improvements in partial factor productivity than those that did not experience a change.     

Comparison of Technology Utilization and Benefits in Taiwanese and U.S. Industries

Lack of information regarding technology benefits along with uncertain competitive advantage from new technology have resulted in industry reluctance to implement new technologies. Three hundred and seven completed projects from across Taiwan and the United States have each been assessed for the levels of technology employed on 68 different common project work functions (WFs). In addition, the projects have been assessed for the levels of overall project cost- and schedule-performance attained. This paper reports on the details and findings of this study. Specifically, differences in technology usage between the Taiwanese and U.S. industries are analyzed. Project technology findings are presented by project phase and work function—both task automation-type work functions and integration-link WFs. Project success findings for the Taiwanese and U.S. industries are presented and comparisons across national boundaries are discussed. Findings from this study can provide information on the difference in technology usage and benefits between the Taiwanese and U.S. industries.