Dispute Avoidance: Why it matters?

This article is the first in a series intended to present my thoughts on disputes and how to avoid them. For decades, I have voluntarily played the role of a pacifist in various construction projects and forums of different scales. This role reflects my strong realization of the fact that disputes are avoidable mishaps in the construction business that are better eliminated than resolved.

In my view, disputes are never dealt with surgically. Once they arise, every party gets hurt. There is no winning party in a dispute, only a party with lesser loss than another while unquantifiable and irrecoverable losses accumulate on both sides. I have always believed that while disputes can be resolved, the parties' positions can never be fully reinstated. Parties in disputes can be awarded damages but never regain the time lost that could have been used in other ventures.

No matter how enticing the monetary recovery might be, a company's reputation suffers from a stain that never fades. This issue worsens when that company repeatedly gets into disputes. Throughout my long career in construction, I have encountered executives who proudly boast their dispute-free records, believing these records give them an edge.

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Simply put, the dispute resolution process is like a machine that converts everything into monetary terms. Losses of cost, time, reputation, opportunity, and human assets are all recoverable — if ever — only in the form of money. However, money is a language that falls short of expressing all the losses.

At the outset of discussing ways to avoid disputes, it is crucial to take a step back and start from the very beginning: what is a dispute?

Construction projects involve daily interactions among several entities through contracts that stipulate each party's rights and obligations. Due to various reasons, disagreements over those rights and obligations can arise. These are disagreements until an official notification — typically called a notice to claim or notice of claim — is served. This notification transforms the disagreement into a claim.

Moving forward, claims are managed through strict processes involving submissions and assessments, leading to the claim's conclusion: determination. Determination is a decision made to award the aggrieved party damages, bringing them as close as possible to their financial situation had the claimed events not occurred. This determination may resolve the claim, or it may not. If either party is dissatisfied with the determination, they serve a notice of dissatisfaction.

The serving of that notice of dissatisfaction — and not before — ignites the dispute state. In other words, a dispute evolves from a claim, which itself is derived from disagreement.

The question that arises is: can we have dispute-free projects?

Well, the answer depends on several factors. Projects carried out for certain employers by certain contractors are closer to being dispute-free than others, depending on the cultures of those employers and contractors' organizations and the management styles of both. Adversarial management is more likely to leave disagreements unresolved to evolve later into claims and perhaps disputes. Conversely, projects with higher certainty of scope definition are less likely to yield disputes.

It can be clearly stated that the occurrence of disputes is a direct result of certain events throughout the project, and strict control over these events might eliminate the probability of disputes altogether. So, having a dispute-free project is possible. However, this should not be misinterpreted as a claim-free or disagreement-free project. Disagreements are a natural part of human interaction, and individuals tend to pursue what they believe are their rights in the form of claims.

If disputes can be eliminated, then why do corporations seem not so keen to avoid them?

The answer to this question, in my opinion, lies in two main points. First, construction companies often don't realize how valuable it would be to have a dispute-free work environment. Corporate executives set out strategies for future growth and development of their organizations. It would be far more advantageous for an organization if its leaders focused on future growth rather than being bogged down by multi-year-old unresolved disputes. An agenda of an executive management meeting that is entirely future-focused is more likely to result in better growth (assuming all other factors remain constant).

Second, not all executives seem to realize that entirely avoiding disputes is achievable. One would probably not pursue an unachievable goal. With some awareness-raising efforts, construction leaders can develop a common understanding of dispute avoidance and achieve it.

Imagine a construction business without disputes and how rewarding it would be for both sides, employers and contractors. This is not a fantasy. It is a mission that all construction practitioners should pursue. The further we progress in this mission, the more we contribute to a better construction world.