Causes of construction disputes
In this article we are going to look at the causes of construction disputes.
Stravelles run a course in Adjudication which aims to allow the student to run their own adjudication as the referring or responding party without paying for legal representation.
We support legal representation in more complex cases but we want to encourage especially smaller companies to feel more confident fighting for their contractual rights.
Introduction
The Construction Industry generally recognises that construction disputes will occur regularly no matter what. if we compare the construction industry to the human body and disease, the industry tends to focus on treating the symptoms rather than prevention. So every construction contract will have a wide host of conditions and clauses that deal with every manner of possible dispute and there are several viable dispute resolution techniques.
In this article we will identify the symptoms/ manifestations of construction disputes and then examine the root causes.
Symptoms of the causes of construction disputes
In a construction project, construction disputes are simply the symptoms/manifestations/signs of deep underlying causes that bubble to the fore during a construction project. The most common construction disputes can be grouped into categories based around cost, time and quality.
These disputes are not the problem, they are the symptoms. Using the health metaphor disputes are the allergic reaction caused by contact with an external object. The reaction can be treated but the external object is still there and will lead to further issues.
Lets look the most common symptoms of underlying issues in a construction contract.
Variations/changes to the contract
In a typical construction contract, the Client will attempt to change the contract several times. For example, they may instruct additional works or instruction that some works be cancelled.
These variations or changes to the contract are dealt with in most construction contracts but there will be inevitable arguments about the time and cost implications of each change.
Variations to the contract lead to construction disputes. But please note that changes themselves are not the cause of disputes they are the result of the cause. The real cause is why do we need change in the first place? We discuss these underlying reasons later on in this article.
Delays
If there is a delay in progress by the builder or the Client is delayed in handing over access to the property this will lead to disputes over time and cost. Again, the contract has sufficient mechanisms to deal with delays.
For example, the builder is delayed by several weeks because they cannot the materials delivered to site on time.
Again, we must point out that delays are not the cause of the dispute. Whatever has lead to the delay is the cause of the dispute. The real cause may be that the builder is too busy, is incompetent, is not planning ahead.
Or the real cause could be that the factory making the material closed down for several weeks due to a fire.
Poor Quality and Workmanship
If a builder has completed works to an insufficient quality level then there will be a dispute over time and cost in rectifying the works. Again, the builder carrying out the works to this poor standard is not the root cause of the dispute. It is instead the symptom of an underlying problem. Why did the builder carry out these works to such a poor quality? What was missed along the process and who missed it?
Root causes of construction disputes
So why do construction disputes really happen ? We have seen that construction disputes are usually concerning changes to the contract, delays to the program and issues with the quality of workmanship. But there are plenty of ways to deal with an event and subsequent dispute once it has occurred.
But what is the underlying cause of an event that leads to a dispute.
Site conditions
The existing site conditions of a property can lead to a host of events and issues leading to disputes. For example, the existing structure of an building to be refurbished may have lots of cracks and faults that need to be repaired. If these are not identified then they will be discovered during the works which will be the event and then there will be a dispute over time and cost.
The Client should invest in front end, pre-tender investigation and surveys so that the contractor can be aware of any issues and allow sufficient monies to deal with these issues.
Lack of research
If the Client or their design team has not researched the existing property and any potential issues with the property it may lead to events or issues. For example, if a Client has not researched whether they will have access to the rear of their property during the construction works this will lead to an issue once construction commences and there is limited access to the property.
Bad design
If the Architect or design professional has made a mistake in the design or just have not developed it sufficiently then this will lead to a huge amount of questions during the construction process leading to disputes over time and cost.
Uncertainty around the design
Sometimes even the best design professionals are not certain about what will happen once construction works commence. For example, in most groundworks and foundations packages there are some risks that are complete unknowns. For example, a groundworks package in an urban area might uncover an ancient Viking settlement. There is no way of knowing what is in the ground before you start digging. Sure, there can be trial holes and scans and so on but it will not eliminate this risk. So, there is always the chance that uncertainty will give way to actual real issues on the site. Real issue will lead to disputes over time and cost.
It is important to note that sometimes the construction team will be lazy and say that items which could be investigated or designed further are just too unknown to be planned for and instead a provisional sum is inserted. A provisional sum is a guaranteed future dispute over time and cost.
Bad actors/personalities
If the Client, Architect, Design professional, builder or any member of the team has a bad attitude or is particular conniving, unprofessional, manipulative then this will easily lead to a breakdown in a team spirit mentality.
Differing goals
Different parties come to a construction contract with different goals. A Client may come to the contract wanting their building completed for the least amount of money possible and the best quality possible in the shortest amount of time. A builder may want to make as much profit as possible. An Architect or design professional may want the best design possible that will reflect their own personal (and not Clients) vision for the property. These competing goals will lead to issues and events that turn into disputes over time, cost and quality.
Poor culture
Some business will have a bad culture that is not helpful for a construction project. A Client might not care about health and safety and want to save money. The builder might want health and safety to be his number one key value. These differing cultures will clash during a construction project leading to issues and events that will become disputes over time. cost and quality.
Complexity of the project
Sometimes a construction project is very complex with a result that is difficult to achieve. If the project is not researched, designed, planned and executed one hundred per cent then this will lead to issues and events that then become disputes.
Poor quality contract documentation
If a construction contract is not prepared correctly or the contract documentation is not complete then this will lead to issues and events that will be disputed over. For example, if the builder when submitting a tender has only been issued provisional drawings then his price will of course be reviewed once the design is finalised leading to disputes over time and cost. Sometimes Clients and their professionals create bespoke contracts which shift a disproportionate amount of risk onto a builder who is not commercially savvy. This action leads to inevitable disputes over time and cost post-contract.
Events/life
Sometimes disputes will arise over issues and events that are just well, life. Most construction contracts include provisions for bad weather, a war, a fire burning the building down, a freak storm, a terrorist attack. Things happen in life that are not foreseeable that become disputes over time and cost.
Negative contracts
Some Clients and their consultants like to draw up bespoke contractual versions of construction contracts. They are of course trying to stack the house against the contractor and reduce the Clients risk.
Of course, this leads to issues during construction. A badly drafted contractual change leads to several possible interpretations and now post-contract they will be argued over.
The Client is best identifying risk and then allocating it fairly and openly. For example, if a property developer is converting an office block into an apartments there will be a certain amount of risk over the existing fabric of the building. If the developer invests in surveys and investigations then he can reduce his risk this way. It would be grossly unfair to sneakily pass any building issues onto the contractor. It would however be quite fair if the builder was informed directly of this risk and they were allowed to price this risk in.
How to eliminate the causes of construction disputes
We have identified the most common forms of construction disputes about issues or events which are symptoms or manifestations of underlying causes. We have examined the underlying causes. Now we will look at how to solve these underlying causes. How do we prevent or reduce the chances of an event occurring that leads to a dispute.
Site conditions
The existing site conditions of a property must be fully investigated and included within the tender and contract documentation.
Lack of research
The existing property and any potential issues with the property must be fully investigated and included within the tender and contract documentation.
Bad design
The Architect or design professional needs to complete a full design that can be included within the tender and contract documentation.
Uncertainty around the design
Apart from a full site investigation, appropriate measures must be taken to fence in risk about unforeseen events e.g. asbestos in the building.
Bad actors/personalities
Bad people need to be rooted out and removed from the team. If someone is not doing their job competently or is constantly negative then they need to find somewhere else to operate.
Differing goals
Ideally the goals of the Client, Architect, builder and all other team members need to be the same goal. This can be achieved through some form of target and rewards system.
Poor culture
The Client needs to select consultants and builders whose values and culture are aligned with their own. If a Client values health and safety then don’t choose the builder who has messy sites!
Complexity of the project
If a construction project is complex, then more time and resources need to be invested to solve any issues before the contract is signed and before works commence.
Poor quality contract documentation
The contract documentation should be fully complete before the tender process. If it is not, then this will lead to issues throughout the construction process. All of the Clients consultants need to have their documentation ready for inclusion into the tender documentation. If it is not, then there will be issues and hence disputes post-contract.
Events/life
There is an infinite amount of potential events that can happen in life. Its impossible to plan for every specific eventuality but you can manage the risk. Appropriate measures need to be taken for managing the risk of life events impacting the project. This can include additional contingencies being included in the budget and insurances to mitigate risk.
Dispute resolution and disputes
Now we will look at how to solve these issues or events once they have occurred.
Fortunately most construction contracts contain more than enough standard clauses and conditions that deal with the most regularly occurring construction disputes.
If a contract cannot deal with the issue or event sufficiently or the contractual parties cannot agree then there are several forms of dispute resolution available to them including:
- Negotiation
- Mediation
- Conciliation
- Arbitration
- Adjudication
- Litigation
We at Stravelles recommend negotiation as the first port of call for any dispute followed by Adjudication. But if you are regularly signing construction contracts you need to take account of and eliminate the causes of construction disputes we have discussed because otherwise you are sentencing yourself to a constant recurring cycle of disputes.