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Disputes in Construction Contracts

Commonly experienced but not fully understood?

 

STUDENT PAPER

By Quentin Duchaussoy

SKEMA Business School

Lille, France

 



ABSTRACT

This paper aims at understanding the most common disputes in construction contracts and especially know the alternatives dispute resolution to consider when a dispute arises. A dispute is common and not always well managed. Do causes of disputes in construction contracts make the project reaching a dead-end? To answer this general question, we focused, all along this paper, on assessing and analyzing the concerned alternative dispute resolution. To deeply analyze them, we used a Root cause analysis to understand the leading cause. Then, we used specific tools such as non-compensatory model, a multi-attribute decision-making grid, a matrix analysis and, an additive weighting technique model. We used them to assess each scoring attributes, each alternative, and finally the best alternative dispute resolution. Then, we have made a Pareto analysis to highlight the impact of disputes with Mediation and without it.

Finally, we discovered that Mediation was the best alternative dispute resolution thanks to many aspects explained in the following paper. Even if, Mediation seems to be the best, other alternatives are necessary to be understood and taken into account. Conciliation, almost the same process, and method as Mediation is slightly less relevant than Mediation but offers an efficient solution to resolve disputes.

Keywords: Construction industry, Disputes, Errors, Alternative, Projects, Obligations, Claims

INTRODUCTION

Construction is a complex but still booming industry which “expenditures have reached over 1,231 billion U.S. dollars”[1] in 2017 in the United States of America. Indeed, this sector is driven by China, India, and the USA and according to the Global Construction 2030, it will reach the historic number of 15.5 billion[2] of dollars by 2030. Construction involves many people, from owners to subcontractors and a certain complexity in terms of cost and time. Indeed, this complexity is also present in construction contracts and can lead to conflicts between the different parties involved. Nevertheless, conflicts are highly common in this industry because of the number of participants, self-interest, huge project, and tremendous costs. Hopefully, conflicts can be managed through negotiation. In fact, the project’s fulfilment is not impossible if conflicts are well and quickly handled. If not, the contract could reach a turning point in its realization.

“Projects, by their definition, have a defined start and end date. (…) Projects also include a defined scope, finite budget, and assigned resources. Another characteristic of a project is that they always build something”[3]. The construction contract is a mutual agreement encountered between two parties. Requirements, the length of the project and the cost are recorded into the contract. Indeed, the project manager is the “person responsible for leading, directing and managing the project and project team to deliver the project deliverables to an agree time, cost and quality/performance.” [4] Thus, construction makes entirely part of project management, as time, budget and resources need to be managed.

Moreover, “Disputes are one of the main factors which prevent the successfully completion of the construction project.”[5] A dispute is a disagreement regarding the said contract terms. It could also occur if a party doesn’t meet its obligation. According to this definition, disputes are not constructive conflicts but destructive ones. As disputes are also common in the construction industry and difficult to get out of it, one of the main objectives of a construction project is to avoid any mistakes. Disputes can be caused for many reasons and globally, like Matthew Devries said it is often about three specific variables such as “problems with the contract, problems with the people, and problems with the unknown”.[6]

More…

To read entire paper, click here

 

Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected].

How to cite this paper: Duchaussoy, Q. (2019). Disputes in Construction Contracts: Commonly experienced but not fully understood? PM World Journal, Vol. VIII, Issue II (February). Available online at https://pmworldjournal.net/wp-content/uploads/2019/02/pmwj79-Feb2019-Duchaussoy-Disputes-in-Construction-Contracts.pdf

 



About the Author


Quentin Duchaussoy

Lille, France

 

 

 

Quentin Duchaussoy is a PGE Student at SKEMA Business School currently in Msc Project Management and Program Management and Business Development in Lille, France. He has a strong background in Business development and in Project Management. In 2016, with four partners, they created and launched a website and a smartphone application which localize all places that would interest students from Amiens (France). This project was launched during his two-year degree in Sales Technic at the University of Picardie Jules Verne in Amiens. He integrated SKEMA Business School in September 2016 and will start an internship in January 2019 at Telys as an Internal Project Manager. He is deeply interested by Project Management since he launched Guid’Am and fulfilled numerous projects. He is currently working on the PRINCE 2 and AGILE PM certifications for this semester.

Quentin Duchaussoy can be contacted at

[email protected]
[email protected]

Also available via his Linkedin: https://www.linkedin.com/in/quentin-duchaussoy-324085131/

 

[1] Statista (n.d). U.S. Construction Industry – Statistics & Fact. Retrieved from https://www.statista.com/topics/974/construction/

[2] Graham Robinson. (n.d.). Global construction market to grow $8 trillion by 2030: driven by China, US, and India. Retrieved from https://www.ice.org.uk/ICEDevelopmentWebPortal/media/Documents/News/ICE%20News/Global-Construction-press-release.pdf

[3] John Brasuell. (2014, April). The Difference Between Projects, Programs, and Portfolios. Retrieved from https://www.ims-web.com/blog/the-difference-between-projects-programs-and-portfolios

[4] Harpham, A. (n.d.). Wideman Comparative Glossary of Project Management Terms v5.5. Retrieved from http://www.maxwideman.com/pmglossary/PMG_P16.htm – Project Manager

[5] Emre Cakmak and Pinar Irlayici Cakmak, An analysis of causes of disputes in the construction industry using analytical network process. Retrieved from https://www.sciencedirect.com/science/article/pii/S1877042813050738

[6] Matthew Devries, The Top Three Causes of Disputes On A Construction Project. Retrieved from https://www.bestpracticesconstructionlaw.com/2010/05/articles/project-management/the-top-three-causes-of-disputes-on-a-construction-project/