In an ideal world, everything on a construction project would go according to plan. However, that is not what usually happens. Recent research by Arcadis has found that in fact, construction disputes are rife, and on average consume 17 months per project in time and trouble to resolve.
So, what is the key to minimising disputes and resolving issues more quickly?
Australia’s CRC for Construction Innovation in its 2008 research paper, Causal Modelling of Construction Disputes, highlighted the findings of a 2006 study that found cost and schedule are the “two most significant contributing factors to disputes” in Australian construction projects.
“The main factors that were identified as contributing to cost and schedule overruns were scope changes, incorrect design and incomplete documentation, and late authority approvals,” the report states.
Contract Issues
The Arcadis Global Construction Disputes 2019 report found contract issues commonly lead to disputes between contractors and subcontractors, or clients and project teams.
Sources of conflict can include disagreement on terms and conditions within the contract, or poor management of variations to the contract, including scope creep.
Too Many Cooks in the Kitchen
The scale of many major projects can increase the risks of disputes.
“With mega projects continuing to expand around the globe, contracts, plans and the projects themselves will be more complex, and more parties will be involved in the construction process,” Roy Cooper, Arcadis’ Head of Contract Solutions, North America stated in the report.
“With more project participants, it is essential for those involved to understand the contract, their role in the project, and how to work with the team.”
Lack of Clarity on Changing Conditions
Another key cause Arcadis identified is discovering site conditions are not what the early design and tender documentation predicted. In many cases, geotechnical investigations may have been inadequate, and issues that affect the final design and construction are not identified until after a project has been awarded.
The Who Said What When Dilemma
Master Builders Queensland recommend clear and consistent communication, not only from the project team to subcontractors but also from trades subcontractors to the head contractor.
“Misunderstandings and unrealistic expectations happen often on a building site – and instead of being resolved via open and honest communication, a lack of communication can cause both parties to become emotional, which means you can (perhaps unnecessarily) end up in a dispute situation,” MBQ says.
Poor Management of Communications
But while open and consistent communication is key to avoiding disputes, not managing that communication effectively can be its own set of problems.
Most of us have probably had the experience of spending an hour or more doing keyword searches to try and find a specific document. Or maybe there is a crucial email that needs to be referenced, but the person who it was sent to has moved on and taken their emails with them.
Proper Administration is Crucial
Inadequate project management and administration are a contributing factor to disputes, according to Arcadis report contributor Professor Renato Nazzini from Centre of Construction Law and Dispute Resolution, King’s College London.
Talk About Risks
Communication processes are also key to managing the general risks associated with projects, according to construction law expert Gregory Seador, vice president of US legal firm Shapiro, Lifschitz & Schram.
In a recent article for Risk Management Magazine, he stressed the importance of project team members identifying potential issues as early as possible and clearly communicating those issues to project managers.
Speak Up and Sort It Out
Problems that could lead to disputes such as invoice payment delays, variations, non-issuance of change orders, schedule delays, disagreements on the scope of work or emerging conflicts between team members need to be communicated “early and often so that potential problems can be confronted head-on”, Seador says.
To proactively investigate, he recommends project managers should review all relevant documentation and communications to help prevent an issue escalating into a formal dispute.
Establish Good Systems
Project reporting also needs to be consistent and Seador says it is best to put systems in place at the start of a project.
“While these reports can take many forms, participants should always track costs, resources, schedules, status of the work, changes and potential changes,” he says.
“A system of detailed, complete and consistent reporting will improve your odds of preventing formal disputes.”
How a Digital Solution Can Help
Research into records management in the Australian construction industry by Michael Nycyk, an Associate of the Australian Computer Society, found that despite searching for information being a costly exercise in terms of time, establishing document management processes was regarded as less important than getting construction work completed.
“This is despite the current capacity of electronic and paper RMS (Records Management Systems) to increase the speed of retrieval of record information and store vast quantities and formats of records,” Nycyk wrote in an article for Records Management Journal.
He found that where firms had adopted digital RMS approaches to manage project documentation and communications in an efficient and easily accessible way, users experienced substantial benefits in terms of less lost time, less stress and conflicts averted.
Procore Senior Product Marketing Manager – International, Alexandre Teplitxky, says Procore’s Correspondence management system helps address many of the pain points in communication that can contribute to conflicts.
A recurring theme is the wasted time spent searching for a given piece of correspondence where a central “single source of truth” has not been established.
“Large projects have thousands of exchanges and it becomes quickly cumbersome to sift through email inboxes that are not labeled appropriately,” Teplitxky says.
Another risk is losing key items of correspondence because the original recipient is no longer on the project team.
Where firms had adopted digital RMS approaches, users experienced substantial benefits in terms of less lost time, less stress and conflicts averted.
“The turnover in the construction industry is very high, so there is a high probability that during the course of a multi-month project, one or more key team members will leave the project and possibly take crucial correspondence with them that is not recorded in a central system.”
Procore’s Correspondence management system integrates with other parts of the digital project management and financials toolkit to bring all project communications together with business processes in one accessible, secure cloud-hosted location.
It enables project managers and project teams to save time and more effectively manage all elements of project communication from early design stages through to commissioning and handover. This also assists with managing risk, navigating change and also potentially averting disputes.
Excellent work. Your assertions suggest communication networks between all team members on large-scale projects are as crucial as when I researched in this area. Keeping track of documentation when someone finishes their duties on the project show how crucial good systems need to be. A small document could hold the key to progress. Thanks for writing this.
Great article which resonates with all relevant professionals in this space. We are all too familiar with the risks of omissions and errors in design documentations that get passed on to the main contractor exposing the main contractor to risk. Procore is instrumental in providing an effective solution to identify these errors and omissions with enough time to address them with the client and relevant stakeholders before construction. Most disputes may often arise when these risks become known too late during construction and most especially after the fact.
Hi Willow,
This post was truly worthwhile to read. I wanted to say thank you for the key points you have pointed out as they are enlightening.
It’s no secret that construction project management is quite complicated. The management of a construction project requires knowledge of modern management as well as an understanding of the design and construction process. It is a really challenging undertaking wherein a myriad of parameters and elements should be exhaustively analyzed.
Having project reporting be consistent sounds like a great way to be ahead of the game when it comes to legal issues. If everything is documented and on a schedule then it will be easier to provide information to a lawyer. I imagine this would help build a strong case for any issues that could arise.