Why disputes should be avoided
Where possible disputes should be avoided because they:
- are time consuming – don’t underestimate the time that disputes take to resolve, time that could be better utilised elsewhere on the construction project, or on other projects
- can damage the construction company’s reputation – clients and subcontractors often avoid contractors that have a reputation for project disputes
- damage the relationship between the parties – the relationship seldom returns to normal after a dispute
- they are costly especially when they become legal and involve lawyers
- they may end poorly for the construction company who doesn’t receive the full value of their claim
- they can disrupt the construction project and sometimes cause further problems
Generally most disputes can be avoided if appropriate actions are taken, such as ensuring:
- There’s a legally enforceable contract in place which protects both parties’ interests.
- The contract is well written and doesn’t have conflicting clauses or contractual loopholes.
- The contractor understands the contract and complies with its provisions. Often Project Managers don’t read the contract until a dispute arises – it’s normally too late then!
- The contractor communicates with the client and their subcontractors, timeously notifying them when problems and variations arise.
- The contractor submits and resolves variations as soon as practical.
- Clients act in a fair and reasonable manner.
- Accurate records are maintained.
- There’s willingness by the parties to talk and negotiate.
- Personalities and emotions are kept out of the dispute.
- The contractor admits when they’re wrong and doesn’t lodge extravagant claims.
- The consequences of escalating the dispute are weighed up carefully, since the costs of legal action may be more than the outcome is worth.
- Expert advice is sought when necessary.
- The construction contract is administered in a spirit of honesty and cooperation by all parties.
- Senior management need to be aware of potential disputes and problems on a project so they can take the necessary action and intervene if required to avoid the problem escalating.
Sometimes a dispute is unavoidable, but I’ve generally found that most construction variations and claims can be amicably settled without going down the dispute resolution or legal process.
When disputes are unavoidable
Unfortunately disputes which cannot be resolved do arise, and then it’s important to follow the dispute resolution process stipulated in the contract. Only as a last resort should you proceed down the legal route. Having said this, though, do not hesitate to ask for a legal opinion or for expert advice. Of course also ensure that senior management is aware of the problems and the next steps being considered.
Just because there is a dispute doesn’t mean you can walk off the project. Sometimes construction companies do this, but it could be a fatal mistake if the proper termination procedures haven’t been followed, and may allow the client to take action against the contractor for breach of contract.
Contractors need to be contractually astute. They need to understand the terms and conditions of the contract when they price the project, ensuring they are acceptable. These terms and conditions should be checked before the contract is signed. Project Managers need to understand their contracts and ensure they administer the project in terms of the conditions. By being proactive and knowledgeable most disputes can be avoided.
For other similar articles read:
15 Questions to ask before starting your next construction project
Are you working for free on your construction project
Will your next construction claim be successful?
(Written by Paul Netscher the author of the acclaimed books ‘Successful Construction Project Management: The Practical Guide’ and ‘Building a Successful Construction Company: The Practical Guide’. Both books are available in paperback and e-book from Amazon and other retail outlets. This article is adapted from information included in these books and was first published in qsadvisor www.qsadvisor.com . To read more visit pn-projectmanagement.home)
© 2015 This article is not to be reproduced for commercial purposes without written permission from the author.