Construction Dispute Claims Resolution (IPD)

Construction Dispute Claims Resolution (Integrated Project Delivery “IPD”)                                                                                                                                                                                                                         

Dale Carnegie, author of “How to Win Friends and Influence People,” wrote that the way to get the best of an argument is to avoid it. That advice holds true when it comes to construction disputes, as evidenced by the evolution of construction contracts.

The very nature of a construction project lends itself to being ripe for disputes. There are typically many parties involved, including owners, designers, general contractors, and subcontractors. Additionally, construction projects have many components, and they often must be completed in a defined sequence with significant time constraints.

A successful construction project is one in which each party performs as expected and no one suffers an unanticipated financial loss.

While the goal is obviously to avoid conflict, especially the kind that leads to large monetary expenditures and expensive litigation, disputes arise far too often. Increasingly, the parties look to their contracts as the first line of risk protection.

A simple review of how construction contracts have changed over the years reveals an evolution of the types of disputes that have commonly arisen on projects and how contracts have attempted to address them.

CONTRACTS HAVE EVOLVED WITH TIME

A half-century or so ago, most construction contracts focused on “scope of work” disputes. In an effort to manage the risk of “extra work” claims, these contracts attempted to broaden the scope of work definition as anything needed to produce an intended result regardless if it was shown on the project drawings. As project timelines became increasingly critical to all parties, and with the advent of the critical path method (CPM) of scheduling, delay claims rose to prominence. Construction contracts responded by attempting to eliminate delay and disruption type claims.

In response, construction contracts next imposed draconian notice provisions that result in waivers of potential claims if not strictly followed. This resulted in a dramatic increase in contract-driven communications for every hiccup on a construction project. Rather than providing a level of comfort, such contracts promoted adversarial relationships and a “me first” mentality among parties.

Many have come to realize that using construction contracts to shift risk has proven to be an ineffective tool in reducing the incidence of disputes and claims on construction projects. This has led to the development of new approaches, which instead of impeding effective communication, embrace the belief that project cost and time issues can be controlled better if they are understood by the parties and resolved as quickly as possible. The most commonly used collaborative approach is called Integrated Project Delivery (IPD).

INTEGRATED PROJECT DELIVERY

The IPD methodology has become increasingly popular over the past decade. It is a highly collaborative process intended to replace individual participant success (or loss) with collective success (or loss). All parties place their financial resources at risk in exchange for the right to collectively manage project challenges and the right to share in the financial reward for a successful result.

This collective management approach is dependent on timely and complete communication of all information related to project issues, regardless of fault. The key to a successful IPD project is the development and acceptance of common project goals and objectives and the design of a project management structure which provides for prompt, collective and collaborative resolution of project issues.

The process requires the parties to spend time, effort and legal fees to develop the specific management and communication structure which will provide the greatest chance for project success. If this effort is not undertaken at the initial stages, shared expectations will not be met and the parties will quickly slip back to their more traditional adversarial roles.

The IPD contract must focus on the means and methods of prompt and complete communication. This may be the most difficult challenge for IPD, as it represents a complete departure from the more “typical practice.” Usually, construction project communication is highly filtered and designed to spin, shift, or deflect responsibility.

For any collaborative process to work, the communications must be prompt, complete and unfiltered, or the decisions made in response may be flawed. Since IPD is founded on shared success (or failure), it is critical that all participants be equally invested in the process. The IPD contract must reflect this investment.

Oscar A. Cortes, Construction Claims Resolution Engineer, DRBF member

VP International Relations at FEMCIC & WAPPP North America Leadership Committee