Avoiding Construction Disputes

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Regrettably, some construction projects end in long and acrimonious disputes between the employer and contractor, or between the main contractor and subcontractors.

These disputes appear to occur more often these days.
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Frequently the only real winners from these disputes seem to be lawyers.

• What are the costs of these disputes and are they worth it?
  
• Why do disputes occur?
  
• Is it possible to avoid disputes on our construction projects?

"Submitting a variation claim (change order request) is not a dispute. A dispute arises when the contractor and the employer cannot agree that the variation claim (change order) is legitimate, or they cannot agree the quantum of the claim."

Disputes also arise when one party does not fulfil their obligations in terms of the contract despite repeated requests from the other party to comply. For example; the employer does not pay the contractor, or the contractor fails to rectify faulty work which is due to their fault.
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Although disputes are often characterized by a formal dispute resolution process, many disputes simply result in a breakdown in communication between the parties, threats, unhappiness, and a prolonged social media and mainstream media slanging match, which can lead to damaged reputations and be a distraction. Many disputes are left unresolved and fester on, while sometimes the slanging match leads to a further dispute, or legal action.

Examples of disputes gone wrong:
https://floridapolitics.com/archives/316849-downtown-st-petersburgs-bliss-condo-owners-sue-developers-over-shoddy-construction
https://therealdeal.com/miami/2020/08/03/codina-partners-affiliate-allegedly-owes-3-6m-for-downtown-doral-condo-construction-lawsuit/
https://www.chicagolawbulletin.com/nixon-peabody-get-3-6-million-attorney-fees-20200602

​Is it possible to resolve variation claims amicably without declaring a dispute? 

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• I have been involved with over 120 construction projects.
• I submitted variation claims (change orders) on almost all these projects.
• Some projects nearly doubled in value when we were granted the change orders.
• Some projects increased in time by up to 80% when our delay claims were approved.
• I settled all claims amicably with the employer, except two projects. One had a dispute adjudication board on the project, and this was used to resolve the issue. One project we employed a lawyer and declared a dispute because the employer did not respond to our claims – the employer eventually came to the table and agreed most claims without us going to formal dispute resolution.
• I got most of the time and money I claimed in all these variation claims and change order requests.
• Importantly we did further projects with most clients. In other words we did not damage our reputation despite the magnitude of these claims. There was little acrimony and no grudges held by either party.

So yes I believe it is possible to resolve variation claims and change order requests without reverting to legal actions and declaring a dispute.

​Reasons for construction disputes 

Image by Gerd Altmann from Pixabay

• Contractors and employers seem to be becoming more litigious, literally suing for anything.
• Construction now seems to be more about the winner takes all approach – can I get money for nothing, or can I get work done for free, rather than let’s make this project a success for everyone. Little teamwork and all about me.
• Project managers have little understanding of contractual matters, and even less understanding of their current project contract.
• Project managers are quick to abdicate responsibility for contractual matters to contract administrators and lawyers.
• Projects are poorly managed by the client/employer’s side which results in numerous variations and delays.
• Employers’ representatives cover their mistakes or protect themselves, denying responsibility for changes, delays and disruptions, expecting the contractor to make up the lost time and costs at their expense. This is dishonest! 
• Projects are poorly planned and managed by the contractor. This results in problems for the contractor and they try and recover lost time and money through variations.
• The contractor does not control the employer’s team and allows variations to occur.
• There is a lack of trust between the parties. This leads to a lack of cooperation.
• Employers are focused only on price when selecting contractors. Can the contractor deliver the project? Does the contractor have a good reputation?
• Contractors are focused on winning construction projects at any cost, with little thought for the project risks, the employer’s reputation, or the employer’s budget.
• Contractor’s variation claims (change orders) are poorly prepared, badly presented, and often lack supporting documentation. Contractors believe that if there’s a change they must be granted what they ask. But the onus is on the contractor to prove the facts!
• Arrogance and egos. I’m always right. Contractors/Employers are always wrong.

In the next article we will discuss why construction disputes are bad for the parties, and how to avoid construction disputes. ​How to avoid construction disputes

Other useful reading:
Don’t start construction projects without a proper contract
Is Your Construction Correspondence Losing You Variation Claims or Projects?
When Contractors Can’t Claim a Delay From Their Client on Construction Projects

This article is from the webinar Avoiding Construction Disputes by the author and information included in author's book Construction Claims: A Short Guide for Contractors. 
This easy to read book demystifies the claims (change order) processes ensuring entitlements are claimed. Learn when you can claim, how to make claims compelling, and the supporting documentation required to win. Your eyes will be opened to numerous events, costs and impacts. Knowing some of these tips could dramatically improve profits and avoid time consuming acrimonious disputes.
Also included is advice for contractors to avoid and defend claims from employers and subcontractors.

​© 2021 This article is not to be reproduced for commercial purposes without written permission from the author.

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