A construction project involves different parties. The people involved look into various technical and non-technical issues, and overall there are numerous complex contracts. With so many complexities in the procedure, disputes are obvious. However, when there is one, it becomes crucial to get it efficiently handled and resolved timely. Construction disputes, if not handled properly, may result in damaged relationships, costly delays, and potential litigations.
Construction dispute resolution is a term that defines the process used to deal with and settle a conflict arising out of a project. It can be a conflict between stakeholders or a dispute regarding a construction contract. There are several methods of resolving disputes in a construction project. These methods have their advantages and disadvantages. But it can be more complex to decide which of those methods will be suitable.
In this article, we will discuss the methods and guide you to decide between them.
What is meant by construction dispute? Why it happens?
A construction dispute is nothing, but disagreement between the stakeholders of any project. It can be between two parties or more than that.
There can be various reasons behind the dispute arising due to the following:
• Delay in project schedule
• Violation of construction contract
• Change in design
• Payment issues
• Poor material quality
• Change in work scope
These are some of the prominent reasons. When the disputes are kept unresolved for long, they increase the budget of the project, cause unnecessary delays, and may even lead to legal proceedings and higher compensation.
How do you resolve construction disputes?
There are different construction dispute resolution methods. These are as follows:
Negotiation is the most commonly used dispute resolution method where the parties or their representatives try to reach an agreement without involving any third party. The conflicting stakeholders often use this first step to find a satisfactory solution on which all of them can agree. Whether the negotiation process will be successful or not, depends upon the communication of the stakeholders themselves and their attitude toward finding a solution.
With this method, expensive methods like arbitration and litigations can be avoided. However, for the method to be successful the parties involved must be willing to talk and mutually agree to the outcome.
In a construction project, a third party is called a “Mediator”. He is the person who helps the parties involved in the dispute to settle it and reach a mutual understanding. The mediator meets the parties involved in conflict confidentially and listens to their viewpoints. The mediator only facilitates the communication between the parties involved in the conflict and does not provide any decision for the parties. It is where it differs from arbitration and litigation. The only risk with this process is that the business secrets have to be shared with an outsider and the parties may disagree.
Conciliation is similar to mediation; the only difference is that the neutral third party tries to resolve the conflicts and reach a settlement in the presence of the conflicting parties. The independent person listens to the disputes of the parties involved and proposes a resolution in writing. It depends upon the parties whether they will accept the proposed resolution or reject it. As the conciliator has no judicial power to enforce the resolution, the parties may not obey the outcome.
In this process, the conflicting parties agree to submit their disputes to one or more arbitrators. There are no legal bindings in case of arbitration, but since the parties have mutually selected the arbitrator, they are bound to follow the outcomes. However, an arbitral proceeding is most of the time similar to the court proceedings. Compared to the previous three processes of dispute resolution the arbitration process is expensive that the conflicting parties have to bear.
This process is similar to the arbitration process except that it is legally binding. The decisions are taken by a judge or panel of judges who act as adjudicators. It is governed by the country’s formal rules and acts and requires formal evidence.
Litigation is a way of resolving disputes using legal means. In this process, one party confronts the other party or parties following the formal rules and laws of the jurisdictional area. However, in recent years, the use of litigation as a means of dispute resolution has decreased as it is a long-drawn process. So, other methods of dispute resolution can be implemented.
Which method is best?
Every construction dispute is different, and the resolution process depends on the specific circumstances. Some are complex and may require a formal and lengthy process, while others can be resolved with mutual understanding. It is always better to get assistance from construction consultants. If you involve a consultant from the outset of a project, the conflicts can be avoided. Even if it happens, it can be resolved quickly and inexpensively.