Disputes Prevention & Resolution (Best Practice)

RT-023 Topic Summary
RT 023

Overview

In the construction industry, disputes are not uncommon. The CII Dispute Prevention and Resolution Research team was formed to review the causes and administrative costs of such claims, recommend procedures for avoiding claims, and investigate alternatives for early, equitable settlement of claims. They further set out to understand the nature of such disputes as well as the steps required to prevent and resolve disputes in the contract administration process. Additional focus was applied to investigating alternative dispute resolution and techniques that prevent disputes from occurring or aid in timely on-site resolution.

Through research, surveys, and a pilot Dispute Review Board (DRB), RT-23 found that there are five main conclusions:

  1. The industry must change.
  2. The change requires three steps.
  3. DRBs work.
  4. Project personnel must remain directly involved.
  5. Owners hold the key to implementing the system.

Key Findings and Implementation Tools

1 : The Industry Must Change

In order to reduce conflict and litigation in the construction industry, a comprehensive and systematic approach to the prevention and resolution of disputes must be adopted. However, one must understand the following concepts in order to implement the change: (RS23-1, p. 17)

  • A change is required. Conflict and litigation are serious problems in the construction industry. Management resources which should be directed towards the primary goals of the industry are diverted, cost-effectiveness is reduced, and little of lasting benefit is achieved.
  • Conflict and litigation are the end result of the claims process. The process starts when problems are permitted to escalate into disagreements and disputes. It continues when these, in turn, escalate into conflicts and litigation. The process grows in hostility and cost.
  • Early and continuing involvement is critical. Prevention is better than resolution, but given the nature of the construction industry, disputes will occur. Management must take proactive steps throughout the project life cycle to prevent and resolve disputes.
Reference: (RS23-1)

2 : The Change Requires Three Steps:  Start Right, Stay Right, and Provide for Resolution

In order to create a comprehensive system for dispute prevention and resolution, a project must:

  • Start Right by having clear objectives, scope, and schedule in the pre-construction engineering and documentation stage. CII provides information to improve engineering and documentation which have a positive impact on dispute prevention.
  • Stay Right by preventing problems from escalating into disagreements and disputes during construction. Partnering, team building, and other techniques to improve relationships will positively impact the ability to stay right.
  • Provide for Resolution by focusing on the need to prevent disputes from escalating into conflict and litigation. Quick and efficient on-site dispute resolution that is fair to both parties must be taken. DRBs have been found to be effective.
Reference: (RS23-1)

3 : Dispute Review Boards Work

Dispute Review Boards (DRB) can be an effective way to facilitate timely on-site resolution of disputes, preventing matters from escalating costs and timelines. They have played a major role in preventing and resolving disputes in the public heavy civil engineering sector of the construction industry, and the research shows that they can be applied to the private sector.
(SD-95, p. 35)

Reference: (SD-95)

4 : Project Personnel Must Remain Directly Involved

Claims is a process, which escalates in both cost and time as the dispute is addressed further from the day-to-day activity and personnel. Addressing problems before they result in conflict avoids the Continental Divide and limits exposure to delays and escalating costs. As such, disputes are best resolved with on site with the project managers playing a major role. This insures that those directly involved with the dispute remain involved with its resolution and that this takes place in parallel with the performance of the work. 

The existence of a DRB forces project managers to benchmark their decisions, actions and inactions against what would be seen as fair and reasonable by the board. This has a positive effect on attitudes and helps avoid litigation.
Reference: (SD-95)

5 : Owners Hold the Key to Implementing the System

In order to “start right,” research shows that it is the owner, their lawyers, and their project managers that hold the key to implementation. This can be done by the owner insisting on proper scope definition and objective setting in the pre-construction phase. They can also promote team building and partnering to “stay right.”

Reference: (SD-95)

6 : Implementation Tool #1

IR23-2, Prevention and Resolution of Disputes Using Disputes Review Boards

Is a document created by the research team with the following objectives: 

  • To study the functioning of dispute review boards (DRBs) in the field in order to identify the factors that contribute to their success or failure.
  • To determine whether DRBs can be successfully implemented in the private commercial and industrial sector of the industry, and:
    • If the conclusion is negative, state why DRBs cannot be used.
    • If the conclusion is positive, develop practical guidelines for implementing DRBs in the private commercial and industrial sector of the industry.
Reference: (IR23-2)

Key Performance Indicators

Reduced claims, Improved customer satisfaction

Research Publications

Prevention and Resolution of Disputes Using Disputes Review Boards - IR23-2

Publication Date: 06/1996 Type: Implementation Resource Pages: 50 Status: Tool

Disputes Prevention and Resolution Techniques in the Construction Industry - RS23-1

Publication Date: 10/1995 Type: Research Summary Pages: 26 Status: Supporting Product

DPI - Dispute Potential Index: A Study into the Predictability of Contract Disputes - SD-101

Publication Date: 09/1994 Type: Research Report Pages: 71 Status: Archived Reference

Dispute Prevention and Resolution - SD-95

Publication Date: 10/1993 Type: Research Report Pages: 161 Status: Reference


Supporting Resources

Presentations (CII Annual Conference & Workshops)

Plenary Session - Avoid Disputes and Bank the Benefits

Publication Date: 07/1998 Presenter: Number of Slides: 34 Event Code: AC98

Session - Disputes Resolution

Publication Date: Presenter: Number of Slides: 11 Event Code: PIW606


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