Preparing for Construction Disputes
Preparation
for disputes starts before a contract is entered, and continues until all
disputes are settled.
This paper
is a checklist of questions and issues to guide such preparation. Whilst the sections
are arranged in chronological order, no priority is intended by the order of
items within each section, and more or fewer issues may be relevant to a
particular dispute.
The final
section is a summary of key words: an aide-memoire reviewing the intentions of
the more detailed information.
Agree
dispute resolution process
Negotiation
Mediation
Adjudication
Arbitration
Partnering/Alliancing/DRB[i]
Assess the
risks
Project
type
Technically
challenging
Routine
Large
Complex
Budget
Adequate
Tight
Inflexible
Ill-defined
Consultants
Client
type
Informed
Uninformed
Personal
Corporate
Committee
Government
Timeframes
Realistic
Deadlined
Liquidated
Damages
Quality
expectations
Contract
type
Lump sum
Cost up
GMP[ii]
Consequences
of failure
Legal
environment
Physical
environment
Check
Contract Docs
Maintain
ongoing documentation
Know thine
enemy!
[i] DRB: A Disputes Review Board is a standing committee or appointed individual who monitors the contract for emerging disputes and advises on how to minimise or solve them.
[ii] GMP: Guaranteed Maximum Price contract
Cost
over-runs
Time
over-runs
Poor
quality
Poor
communication
Poor
documentation
Mismatch of
expectations
Difficult
personalities
Unforseeables
Misjudged
risks
Botches
Overlaps
Materials
Trades
Documentation
Unclear
responsibilities
Client/Consultant
Consultant/Contractor
Contractor/Subcontractor
Supplier/installer
3. Signals of Impending Dispute
Anger
Frustration
Criticism
Threats
Damaged
Pride
Longer lead
times
Reduced
productivity
Lax
management
Slow
payment
Inflated
progress claims
Increased
formality
Reduced
communications
Increased
communications
Outside
“experts”
Gather information
Can the problem be defined
Confirm what
happened
Why did it
happen
Who was
involved
What did
they do
What did
they not do
What were
the contract requirements
Confirm
intentions of the contract
Confirm
instructions and context[1]
Assess the
information
Is it a
dispute, or a contract issue
What are the
direct consequences
To you
For the
performance of the contract
To
others
What are the
flow-on consequences?
Is the
information reliable
Measurement
of quantities
Quality
benchmarks
Realistic
costings
Biased
reporting
What further
information is required
Tests
Site
examinations
Opening
up
Solvency
investigations
Expert
input[2]
Technical
Legal
Accounting
Dispute
Resolution
Personal
observations/accounts
Willing
sources
Unwilling
sources
What is the
likely attitude of the other parties
Objective
Possessive
Submissive
Devious
Confrontational
Co-operative
What is the
competency of the other parties
Expert
Technical
Legal
Widely
experienced
Narrowly
focussed
Ignorant
Not familiar
with the industry
Not attuned
to logical argument
Will
personalities get in the way of the problem
Solve at the
lowest level
Who can
solve it
Who needs to
solve it
When can it
be solved
Who else is
involved
How/Why
Do they
know
Should they
know
When
Will they
co-operate
Shared
interests
Shared
positions
Shared
information
Other
relationships
Can they
contribute
Time
Money
Expertise
Materials
Labour
Might they
contribute
Are they
solvent
Willing to
come back to the job
As the
lesser of other evils
Act as soon
as preparation permits
Can a simple
fix be effected
Could
changed circumstances reduce the impact
Positions
taken by the parties
Offset
against other matters
Alteration
to contract requirements
Timing
issues
Budget
issues
What are the
consequences of
Delaying
resolution
Failure of
resolution
What are
your POSITIONS[3]
Dollars
Principles
Contract
interpretation
BATNA[4]
WATNA[5]
Are your
POSITIONS
Flexible
What would
change them
Prioritised
What would
change the priority
What are
your INTERESTS[6]
Honour
Goodwill
Marketing
advantage
Relationships
Client’
Consultants
Subcontractors
Suppliers
Expediency
Money
Time
Quality
Are your
INTERESTS
Flexible
What would
change them
Prioritised
What would
change the priority
Who else has
INTERESTS
Who else has
POSITIONS
Do you know
those interests and positions
How can you
find out
What are
they
How do they
differ from yours
Why
How can they
be brought closer to yours
If you were
them
How would
they see your positions
How would
they see your interests
Do they need
you
Does a
resolution establish a precedence
How would
that affect your future Interests
What are the
power issues
How can you
influence them
The Golden
Rule ($)[7]
Authority by
position
Authority by
knowledge
Authority by
size/muscle
Existing and
future relationships
Resolution
process options
Ignore the
problem
Negotiation
Set by the
contract terms
Formal
opinion
Mediation
Arbitration
Adjudication
under the CCA[8]
Parallel
processes
Should you
initiate the process
Create a
recognisable structure
Lay the
“ground bait”
Bring out
the facts
Explain the
involvement of others
Provide
proof, validation, and references
Establish
the relevance of the information
Repeat the
key issues
Summary and
conclusion
Or (put
another way) – the Journey
Where we are
going
How we get
there
These are
the markers along the way
Almost there
– how far it is to go
We are there
(you can tell because…..)
Deal with
the easy stuff first
Use
objective tests and benchmarks
Compare with
understood criteria
Apply
logical extensions
If this…..
then…..
Because
of…..
then…..
What
if…..
then…..
Don’t
personalise
Problems
Attitudes
Arguments
Criticism
This is not
MY problem
It’s OUR
problem
Lets face it
together
Lets solve
it together
You have to
give a little to gain a little
Not often is
there gain without pain
What do
You know
that they know
How does
their view differ from yours
You know
that they don’t know
You think
they think you know
You think
they might know, that you don’t
Prepare to
move
Signal
ahead
Create the
room for movement
Recognise
common interests
Emphasise
the positives
When to
move
If other
side recognises the signals
If they
provide room for movement
If they
acknowledge commonalities
If they
acknowledge the positives
Why move
If they
move
If they
can’t move because you won’t
If there is
a shift from POSITIONS to INTERESTS
To deflect a
potentially damaging blow
New adverse
facts
Unwinnable
argument
The
application of adverse power
New
directions you haven’t prepared for
Movement to
issues you want to avoid
How far to
move
Not too far
too soon
Are your
interests still intact
Consider
your BATNA
Consider
your WATNA
If they were
you, but knowing what they know
What is the
best they could do now
What is the
worst they could do now
How far
would they move now
How will
they react to
The worst
you can do now
The best you
can do now
Consider
their BATNA
Consider
their WATNA
Compare to
what they think you could do
Confirm and
celebrate movement as objective progress
What other
openings are thus presented
How has it
affected the dynamics of the process
Move from
holding positions to meeting interests
Before the
contract
Who
What
How
Context
What if
During the
contract
People
Tasks
Interfaces
Information
Performance
Uncertainties
Potential
contract disputes
Attitudes
Information
Interests
Positions
Conflicts
Dispute
resolution
Differences
Commonalities
Consequences
Options
Satisfaction
Commitment
[1] DRB: A Disputes Review Board is a standing committee or appointed individual who monitors the contract for emerging disputes and advises on how to minimise or solve them.
[2] GMP: Guaranteed Maximum Price contract
[3] Context: Issues external to the contract which may affect it; e.g. government or corporate policies and objectives, highly geared or speculative project, client living on/near the site
[4] Experts: Recent Court decisions have reinforced the concept that experts should match the point being addressed. For example a WHRS assessor would not be acceptable as an expert about an architect’s performance – that would require another architect as an expert.
[5] Interests and Positions: For example, your position might be that your child must be in bed by
[6] BATNA: Your best alternative to a negotiated settlement
[7] WATNA: Your worst alternative to a negotiated settlement!
[8] Interests and Positions – see below
[9] The Golden Rule: “Them wot got th’ gold make th’ rules”
[10] CCA: The Construction Contracts Act imposes a mandatory regime of adjudication on construction contracts
These notes are provided by Orchiston Architects Ltd, Architecture & Dispute Resolution, P.O. Box 9136 Wellington, ph 04 5627 438, based on information as at 20/08/06. They remain the copyright of Orchiston Architects Ltd, and may be copied and redistributed if and only if reproduced in full without any change in content whatsoever to the notes, letterhead/logo, and this footer. They are intended as a general guide only, and not specific advice: the author accepts no responsibility for persons acting or not acting upon the information herein, and specific advice should be sought from the author or other suitable professional in respect of particular issues as and when required.