ABSTRACT
Construction
projects are increasingly becoming complex, resulting in complex contract
documents. Complex construction can likewise result in complex disputes. Disputes
are inevitable in construction projects which predominantly arise from
complexity and magnitude of works, multiple prime contracting parties, poorly
prepared and/ or executed contract documents, inadequate planning, financial
issues and communication problems. Depending on the nature of the
relationship between the parties involved in the disputes and the circumstances
under which the dispute is evolved, different
methods of dispute resolution techniques may be preferable. The objective of this
study is to identify the cause of dispute, to identify the existing practice of
dispute resolution techniques in construction projects, to evaluate the
prevailing dispute handling methods and recommend the most appropriate method.
The method adopted for the study was through questionnaire survey where the
target respondents were clients, consultants and contractors. Based on the
analysed data, there are disputes caused by the clients, consultants and
contractors which are capable of resulting to loss of reputation and sour
relationship between the stakeholders and also loss of profit and business
viability. Negotiation was observed as the most appropriate method of dispute
resolution in construction projects in Nigeria as it non time consuming, cost
effective and restores business relationship. From the findings it can be concluded that construction disputes are a cause
of concern in every project and the solution to this problem is to avoid and
cautiously manage them for smooth running of construction process.
TABLE
OF CONTENTS
TITLE PAGE ................................................................................................................ i
DECLARATION
......................................................................................................... ii
CERTIFICATION ....................................................................................................... iii
DEDICATION
............................................................................................................. iv
ACKONOWLEDMENT............................................................................................... v-vi
ABSTRACT
.................................................................................................................. vii
TABLE OF CONTENTS
............................................................................................... viii-xi
LIST OF TABLES
......................................................................................................... xii
CHAPTER
ONE
1.1 BACKGROUND TO THE STUDY.................................................................. 1-3
1.2 STATEMENT OF THE RESEARCH
PROBLEM ............................................ 3
1.3 JUSTIFICATION FOR THE
STUDY............................................................... 4
1.4 AIM AND OBJECTIVES
................................................................................ 4
1.5 SCOPE AND LIMITATION
........................................................................... 4
CHAPTER
TWO
2.1 THE CONSTRUCTION PROCESS ................................................................. 5-6
2.2 DISPUTES IN THE CONSTRUCTION INDUSTRY
........................................ 6
2.2.1 Introduction ..................................................................................... 6-7
2.3 DEFINITION OF DISPUTE
........................................................................... 7-8
2.4 CAUSES OF DISPUTE IN THE INDUSTRY
................................................. 8-12
2.4.1 The Contract Conditions
........................................................................ 12-15
2.4.2 The Design
Deficiency
............................................................................ 15-18
2.4.3 The Construction
Process ....................................................................... 19
2.4.4 The Consumer
Reaction
.......................................................................... 20-21
2.4.5 Time .......................................................................................................... 22
2.5 THE IMPACT OF CONSTRUCTION
DISPUTES ON THE PROJECT............ 22-23
2.6 CONSTRUCTION DISPUTES
RESOLUTION TECHNIQUES ...................... 23
2.6.1 INTRODUCTION .............................................................................. 23-25
2.6.2 LITIGATION
...................................................................................... 25-27
2.6.3 ARBITRATION
.................................................................................. 27-28
2.6.3.1 Arbitration Rules under the
ACA ............................................ 28-29
2.6.3.2 Composition of Arbitral
Tribunal ............................................ 29-30
2.6.3.3 Jurisdiction of an Arbitral Tribunal
.......................................... 30
2.6.3.4 Challenge
to the Jurisdiction of an Arbitral Tribunal .............. 31
2.6.3.5 Grounds for Setting Aside an Arbitral Award
......................... 31-33
2.6.4 CONCILIATION ................................................................................. 33-35
2.6.4.1 Commencement
......................................................................... 35
2.6.4.2 Conciliators
................................................................................ 35
2.6.4.3 Institutional Assistance
............................................................. 35-36
2.6.4.4 Stages in Conciliation
................................................................ 36-37
2.6.4.5 Legal Effect and Role of the Parties
........................................ 37
2.6.4.6 Conciliator's Procedure
.............................................................. 37
2.6.4.7 Disclosure and Confidentiality
.................................................. 37-38
2.6.4.8 Conciliation and the Limitation Period
..................................... 38-39
2.6.5 MEDIATION
........................................................................................ 39-40
2.6.5.1 Phases of a
mediation ............................................................... 40-41
2.6.5.2 Mediator's
tasks ......................................................................... 41-42
2.6.6 NEGOTIATION
....................................................................................... 42-44
2.6.6.1 Steps (Techniques) in
Negotiating ............................................. 44-45
2.6.7 MINI-TRIAL
......................................................................................... 45-46
2.6.7.1 Commencement .......................................................................... 46-47
2.6.7.2 Characteristics of a Mini-Trial
................................................... 47-48
2.6.8 EXPERT DETERMINATION ............................................................... 48-49
2.6.9 ADJUDICATION
............................................................................... 50-51
2.6.10 DISPUTE REVIEW BOARD
.............................................................. 52-54
2.6.11 EARLY NEUTRAL EVALUATION (ENE) ........................................ 54-55
2.6.12 RENT - A- JUDGE
............................................................................. 55
CHAPTER
THREE
3.1 INTRODUCTION ........................................................................................... 56
3.2 DATA COLLECTION............................................................................................ 56
3.3 SURVEY METHOD........................................................................................ 56-58
3.4 SAMPLE FRAME
........................................................................................... 58
CHAPTER
FOUR
DATA ANALYSIS: PRESENTATION AND INTERPRETATION
4.0 INTRODUCTION ........................................................................................... 59
4.1 DEMOGRAPHIC VARIABLES ANALYSIS
.................................................. 59-64
4.2 ANALYSIS AND DISCUSSIONS .................................................................. 65
4.2.1 Causes of Construction
Disputes........................................................ 65-66
4.2.2 The
Most Appropriate Technique of resolving Construction Disputes.... 66
CHAPTER
FIVE
CONCLUSIONS AND RECOMMENDATIONS
5.1 INTRODUCTION
......................................................................................... 67
5.2 CONCLUSIONS
........................................................................................... 67-68
5.3 RECOMMENDATIONS
................................................................................ 68-69
REFERENCES
........................................................................................................... 70-72
APPENDIX
................................................................................................................. 73-76
LIST OF TABLES AND FIGURES
1.
Fig.2.1 Definition
of Project dispute resolution satisfaction .................... 25
2.
Table
1: Causes of construction
disputes ............................................... 57
3.
Table
2: Respondents Type of Job
......................................................... 59
4.
Table
3: Years of Experience
................................................................. 59
5.
Table
4: Type of Organisation
............................................................... 60
6.
Table
5: Number of Contracts ever
handled .......................................... 60
7.
Table
6: Have you been involved in
Construction Dispute...................... 61
8.
Table
7: If yes who was responsible
............................................... ............. 61
9.
Table
8: If no, technique used in
preventing dispute .............................. 62
10.
Table
9: Causes of Construction
Disputes .............................................. 63
11.
Table
10: Dispute Resolution Techniques
in use ...................................... 64
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE
STUDY
Construction is plagued, perhaps
more than any other industry, with disputes due to the inherent conflict of
interest between the buyers of construction services (i.e. the owner or
employer) and the sellers of the services (i.e. the contractor). The buyer wants
to receive the most value for its construction finance whereas the seller wants
to spend the least amount of money while meeting its contractual obligations.
Unfortunately, these obligations are seldom, if ever, stated in clear enough
language to preclude misunderstandings. Over the years, the industry has
learned to rely on the design engineer or the architect, who formulates the
construction documents, i.e. the most likely author of the misunderstanding, to
clarify it and to decide on the corresponding responsibilities of the parties
(Steve Revay, 1995).
Construction projects are among
the most complicated of human enterprises. High levels of art and craft are
required to translate an owner’s vision into plans and specifications, then
into real structures, one that fits the needs of the individuals and the
public. In addition to technical skills, the ability to coordinate the diverse
efforts of many individuals is crucial to success.
The
parties of a construction contract, the owner and contractor, are a society
with a complex set of interrelated relationships requiring cooperation and
collaboration to coordinate time, resources, and communication. The main goal
of the parties involved in a project’s construction is to have a successful
project. This is defined as a project that has been constructed in accordance
with the plans and specifications, within the time and cost originally
anticipated. The success of a project depends on a number of variables, not the
least of which is how the organisations approach problems and conflicts
(Diekmann et al. 1994)
Construction
projects are increasingly complex, resulting in complex contract documents.
Complex construction can likewise result in complex disputes. Disputes is
inevitable in construction projects which predominantly arise from complexity
and magnitude of works, multiple prime contracting parties, poorly prepared
and/ or executed contract documents, inadequate planning, financial issues and
communication problems. Any of these factors can overturn a project and lead to
complicated litigation, arbitration, mediation, time overrun; increased costs
and a relationship break down among members of different parties involved
(Motsa, 2006).
Construction
relationships in the construction industry all over the world have become more
increasingly strained as years goes on and on. Working relationships,
communications, and contractual commitments are often not carried in good
faith. This has led to most developed countries to search for better
alternatives on how to manage disputes in the construction industry. Though it
has been seen that disputes in the industry is like an un-incurable disease,
means are done to fight the problem.
In the
United Kingdom, for example the standard form of contract that is
internationally used to new engineering contracts has been subject to change;
whereas, in the United States of America the Disputes Review Boards ( DRB’s)
which comprises of three board members to manage disputes in construction sites
was introduced. All this exercises undertaken have proved to be successful.
Disputes in the construction
industry often involve the resolution of complex technical and factual issues.
The formal processes such as litigation may often not be the best way of
dealing with this type of disputes. Traditionally, arbitration has widely been
used, being even included in standard contracts as a means of dispute
resolution and has been found to be cheaper and less time consuming than
litigation.
In today’s complex construction
projects, resolving dispute has become an inevitable part of a project manager's
work. This includes a wide variety of activities ranging from the selection of
a dispute resolution process to the participation in the actual negotiation. An
understanding of the various forms of dispute resolution processes and their
critical factors will no doubt be invaluable to project managers in handling
disputes.
Formalised dispute resolution
techniques like arbitration and litigation have been well developed for the
resolution of construction disputes.
However, many disputes have been
amicably resolved satisfactorily, sometimes informally, without the need for
arbitration or litigation. ADR methods are the responses to shortcomings of the
conventional judicial system such as rigidity and limited choice, especially in
the modern commercial world (Hibbered and Newman 1999). Therefore, the
introduction of ADR methods is to formalize the informality. The new commercial
environment appeals to the application of ADR methods with its characteristics
of choice. Often, more than one method may be used in the same dispute and
parties can then shape the outcome based on the unique circumstances of the
dispute. Fenn and Gameson (1992) have advised that ADR does not seek to replace
the court processes, nor does the use of ADR imply that litigation and arbitration
should not be used at all; they should only be used when other venues have been
exhausted.
1.2 STATEMENT OF THE RESEARCH PROBLEM
The construction industry has
become very complicated that political and economic trends are increasing the
economic pressure resulting in disputes. Construction projects involve diverse
participants mainly the user, client, financer, designer, supervisor, executor,
etc these combination invites more disputes and conflicts between the parties. Due
to the nature of the contract when responsibilities are shared between numbers
of stakeholders conflicts and disputes occurrence are considerable.
Complex construction has brought
about complex disputes in the industry and this eventually becomes a burden to
the industry in terms of production. Disputes and conflicts have gained
frequent rise during construction of projects and this needs an involvement of
a neutral body to resolve disputes as early as possible.
1.3 JUSTIFICATION FOR THE STUDY
Great concern has been expressed
in the recent years regarding the dramatic conflicts and disputes in the
construction industry in the whole world.
This has led to most developed
countries to search for better alternatives on how to manage disputes in the
construction industry.
Developing countries are still
facing this problem and the research on this topic will be on what to do either
to improve or avoid and manage disputes in our local construction industry.
1.4 AIM AND OBJECTIVES
The aim of this study is to
identify the most appropriate dispute resolution technique in construction
projects.
The
objectives are:
•
To identify the causes of construction disputes
•
To
identify the existing practice of dispute resolution techniques in construction
projects,
•
To
evaluate the prevailing dispute handling methods,
•
Recommend
the most appropriate method.
1.5 SCOPE AND LIMITATION
This research was undertaken with
a careful study on data collected mainly on questionnaire survey exercise. The
research was focused on private and government projects in Benue State.