Avoiding construction disputes

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Submitting a variation claim is not a dispute. A dispute arises when the contractor and the client cannot agree that the variation claim is legitimate, or they cannot agree the quantum of the claim. 

Disputes also arises when one of the parties believes that the other party has acted unfairly or they have been prejudiced in some way. 

Why construction disputes are bad

Disputes are bad because:

• They are time consuming
• They often involve lawyers so they are expensive. Read this case: $3.6M in attorney fees atop $600K suit. Here a subcontractor launched a claim for $3 million against the contractor. The subcontractor has so far paid lawyers $4 million to pursue the claim while the contractor has spent $5 million defending the claim over 13 years. With appeals still to come the fees on both sides are likely to escalate further.
• They can be lengthy to resolve – often months and even years and frequently resolution is after the project is complete. See this article where a claim for $37 million has dragged on since 2005 and in 2020 the courts made a determination which will probably still be appealed. The original contract was signed in 1999.
• They damage relationships between client and contractor.
• As long as a variation is in dispute the contractor isn’t paid and the client could even impose penalties on the contractor for late completion.
• They often disrupt the project.
• They may end badly for the contractor.

Avoiding construction disputes

To avoid disputes:

• Seek expert advice when necessary.
• Understand if what you are fighting for is worth the risk, effort and cost.
• Keep emotions out of your decisions.
• Keep your management informed.
• Do not fight the unwinnable.

Sometimes declaring a dispute is unavoidable. The client is plain dishonest or thinks that you will give in.

But disputes can be avoided if:

• Your variation claims are clear, fair and right.
• You have kept accurate project documentation.
• You are willing to engage and negotiate with the client.
• You try the cup of coffee approach.
• You ask for expert help when necessary.
• If the client’s responsible person is unprepared to budge you may be able to meet with their manager or even talk to the client directly.
• It may be possible to come up with other solutions to help the client.

Understand your contract document

When disputes are unavoidable the contract document could dictate the procedure to follow. The document will normally also stipulate the country where disputes should be resolved and the law to be followed.

Make sure you understand these procedures before declaring a dispute.
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Litigation under foreign law and in another country can be vary complicated and costly.

Want to learn more about construction claims? ​

​"All 120 projects I’ve been involved with included Variation Claims – some for millions of dollars. Some projects doubled in value! Yet, 99% of claims were settled amicably and most of what we claimed was approved. More importantly we completed further projects with these clients.” Paul Netscher.

Construction Claims: A Short Guide for Contractors, written by Paul Netscher is an easy to read simplified guide that gives an overview to construction claims.
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"An excellent, concise and very practical guide to successful claims process. This is a no nonsense approach that gets on with it. Packed full of valuable advice for both sides - contractor and employer. 'Short' in the title should not be mistaken for lack of valuable content - this is a cracking book. I also have the authors other books which are equally good. Highly recommended." (Reader Amazon UK) *****
"Objective with very clear text, demonstrating full knowledge of the reality during construction's works." (Reader Amazon.com) *****

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