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Guest Blog: How to Avoid Disputes in the Construction Industry

Guest Blog: How to Avoid Disputes in the Construction Industry

Why Disputes are Messy, and How you can Avoid Them

Some construction projects become embroiled in disputes between the General Contractor and the client, or the General Contractor and their Subcontractors or Suppliers. These disputes often end in legal action, create media attention and often disrupt the project – even bringing it to a halt. Usually it’s only lawyers that benefit from these disputes. Yet, somehow disputes are becoming more frequent on construction projects, almost becoming a way of life for some.

Why Disputes are Messy

Where possible disputes should be avoided because they:

  1. Are time consuming – don’t underestimate the time that disputes sucks from everyone, time that normally could be better utilised elsewhere on the construction project

  2. Can damage the construction company’s reputation – clients and subcontractors often avoid contractors that have a reputation for project disputes

  3. Damage the relationship between the parties – the relationship seldom returns to normal after a messy dispute

  4. Are costly especially when they become legal

  5. May end poorly for the construction company who doesn’t receive the full value of their claim

  6. Disrupt the construction project – sour relationships and generally cause further problems

Avoiding Disputes

Generally most disputes can be avoided if appropriate actions are taken, such as ensuring that:

  1. There is a legally enforceable contract in place

  2. The contract protects both parties’ interests

  3. The contract is well written and doesn’t have conflicting clauses or contractual loopholes

  4. The contractor understands the contract and complies with its provisions (Read: “Top tips for contract survival – understanding your contract”)

  5. The contractor communicates with the client and their subcontractors

  6. The contractor submits and resolves variations as soon as practical (Read: “Additional works on site – the key to making a profit”)

  7. Accurate records are maintained (Read: “A guide to change management”)

  8. There is a willingness to talk and negotiate

  9. Personalities and emotions are kept out of the dispute

  10. The contractor admits when they’re wrong

  11. The consequences of escalating the dispute are weighed up carefully, since the costs of legal action may be more than the outcome is worth

  12. Expert advice is sought when necessary

  13. The construction contract is administered in a spirit of honesty and cooperation by all parties

  14. Managers are made aware of potential disputes and problems on a project so that they can take the necessary action and intervene if required to avoid the problem escalating

Sometimes a dispute is unavoidable, but I have generally found that 99% of construction variations and claims can be amicably settled without going down the dispute resolution process.

When Disputes are Unavoidable

Unfortunately  it is not always possible to avoid disputes. When disputes which cannot be resolved do arise, it is 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, do not hesitate to ask for a legal opinion or for expert advice.

(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. To read more, visit www.pn-projectmanagement.com )
© 2015 This article is not to be reproduced for commercial purposes without written permission from the author.

 

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