A Program Management Approach: Dispute Avoidance (Part 1)

“Disputes are apt to sour one’s temper and disturb one’s quiet.”

Benjamin Franklin

While contentious and unfavorable in terms of collaboration, formal initiation of dispute proceedings remains a fact of life in the complicated business of construction.?With so much on the line from all stakeholders, including often tremendous risks and benefits, pending the successful completion (and future operation), disputes can often take on an exaggerated form when compared to building industry norms.

An Enlightened Approach to the Resolution of Problems and the Avoidance of Disputes

Construction projects, in general, are very susceptible to disrupted progress and unrestrained costs when problems are not solved as they arise. Unresolved problems escalate to claims and claims escalate to disputes. On a super tall project, this reality is indeed magnified exceptionally.?

The Complexity of Super Tall.?When one focuses on super tall buildings, one is typically looking at the following complexities (at a minimum), all of which can too easily lead to claims and disputes:

• Many of the world's super tall buildings are in developing countries where the underlying legal foundation for the project may be a mixed-bag of local law, foreign law and private arbitration conducted under various, and differing, rules and procedures. Predictability of outcome is difficult to achieve in such circumstances.
• Super tall teams are commonly multi-national, bringing parties together from different cultures, legal systems, experience, language, attitudes, and, often, working together for the first time. Tensions developing from misunderstandings to disagreements present the potential to develop into major interference with the best interests of the project when not resolved promptly and effectively.
• Super tall buildings often will challenge the frontiers of tried-and-tested designs, tried-and-tested construction means, and methods and exceed the known performance of specified products, thus placing all project team members in a virtual experimental laboratory while yet being held to strict contractual requirements premised upon the ability of those members to achieve success despite the lack of certainty that the premise can be achieved successfully.
• ?Many super tall structures are built in places where the local workforce is inadequate (in terms of numbers and experience) to build the project, resulting in the need for imported labor that may or may not be capable of the required quality and, often, a workforce with little to no experience in the novel aspects of the project (design, methods and products).
• Super tall buildings may break through the clouds, but the money needed to build them is not without its limits. The growth of project cost due to avoidable delays and avoidable increased costs resulting from the lack of timely and reasonable resolution of problems can be disastrous for the Employer and ultimately all members of the project team.
• Recognizing these complexities strongly suggests the need to anticipate the problems that will develop from them and to design an approach to achieve proactive solutions for these problems in a business-like manner that eliminates the potential for them to develop into contentious circumstances that are inconsistent with the best interests of the project. When a super tall building has achieved a half-kilometer of progress with more to go the thought of an unresolved dispute going into arbitration or the courts of any country literally makes no sense—particularly when the utilization of proven methods to avoid such a result are available.

Proactive Avoidance of Claims & Disputes

In any dispute, particularly in the building and construction industry, it pays great dividends to not only be aware of potential issues in advance, put also proactive and collaborative when they inevitably arise.?This section explores certain specific techniques for maintaining positive proactivity at the project and business level.

Alternative Dispute Resolution (ADR).?ADR is the acronym for "Alternative Dispute Resolution". The "alternatives" adopted by the construction industry are intended to be alternatives to formal dispute resolution; namely, formal arbitration and litigation in courts. What formal binding arbitration and litigation have in common is the loss of control of the resolution of problems that have escalated to the level of "disputes" by submitting those disputes to determination by a third party—the arbitrator or a judge.?

While some in the industry may be heard to say that they find themselves in arbitration or litigation because that is what their contract requires or at the direction of their legal counsel, the reality is that there is no valid explanation why reasonable members of a construction project team cannot solve problems at the field or at business levels before they escalate into claims and then disputes appearing to require formal dispute resolution.?

ADR covers a broad spectrum of processes that may be availed of by those team members from early intervention up until the time when formal dispute resolution may commence to control the resolution of these matters themselves. Clearly, aside from the obvious benefits of avoiding the costs and distraction of formal dispute resolution, the use of these processes avoids uncertainty as to project costs and scheduled completion for all stakeholders.

Problem Solving & Dispute Resolution Protocols at the Project and Business Level.?The most appropriate place to solve problems that have the potential to escalate into disruptive and expensive impacts on a project is at project level in the first instance, and absent resolution at the project-level, at the higher levels of the stakeholders involved. Simply stated, a problem that is solved at the project or business level never becomes a claim thus the potential for disruption and unnecessary expense is avoided.

Clearly, this concept is simple enough, but experience indicates that it can be more elusive than might appear. There is a tendency in the industry to try to resolve issues in the field however when that cannot be achieved, the tendency is to "preserve" the positions of the parties to a later resolution and "move on" with the work. Because this approach appears to yield to the overwhelming need to maintain project progress it may be thought of as a good "resolution."?Imagine a 100-story project with a problem arising on the 60th floor. "Moving on" is of course attractive, however, in too many circumstances it is not "resolution" at all from many different perspectives.?

The project that operates on the "preserve/move-on" approach sets an ultimate path towards deferred confrontation at an inopportune time for the stakeholders and usually to the detriment of the Employer. Major projects that have operated by this approach have proceeded seemingly well for a period only to have the accumulated volume of unresolved problems (by then elevated to claims and disputes) create a stumbling block to progress and even threaten the very continuation of the project. One need only consider the highly publicized threats of the contractor consortium on the Panama Canal expansion to discontinue the work absent a resolution of their claims and the counter-threat of the Employer to terminate the consortium to realize how accumulated unresolved issues can lead to confrontations that threaten the very viability of a project.?Furthermore, the culture of deferral of the resolution of problems to future resolution can be a self-fulfilling prophecy as problems that could be solved with minimal effort are also thrown into the preserve/move-on category and efforts are not even made to resolve them.

For the Project Manager, the timely resolution of open issues affords a realistic platform to monitor and control project schedule and budgets as contrasted with managing the project based upon outdated and therefore unrealistic schedules and budgets. Holding to artificial finish dates on a CPM schedule due to the lack of resolution of a request for an extension of time deprives the Manager of the ability to manage the project as it could and should. The same applies to budget management.

Similarly, the value of prompt resolution of problems at the project level when they arise cannot be overstated from the perspective of all the other project participants. For example, if the main contractor encounters a situation where it believes it is being told to perform more or different work than it contracted to perform in Area "A" and asks for a resolution of that issue, the prompt resolution of that situation at the project benefits all the parties as follows:

• For the main contractor, resolution provides certainty as to scope of work, an agreement of compensation for the changed work (even if lower than sought), cash flow as change orders capture the resolution of the problem and create the vehicle for payment and work can continue to progress based upon a known scope with adjustments to schedule made then, when the problem arose.
• For the subcontractors that are paying the for the materials and labor, prompt issuance of a change order?enables timely payment which, in turn, allows the subcontractor to maintain its schedule as cash-flow problems do not result in reduction of forces.
• For the Designer whose design has been perhaps criticized as being the source of the issue, resolution creates closure as to the issue and affords the designer the ability to resolve any obligations it may to its client, the Employer, in a collaborative environment (even if that resolution has the Designer making a contribution to the final resolution)
• For the Employer the resolution of the problem will likely be at the lowest possible cost associated with the subject work, with no interruption to progress, and with an adjusted budget that will not be subject to surprise claims and potential huge overruns thrust upon the project at its conclusion.

Three “Rungs” of Project Level Dispute Resolution Protocol.?The achievement of resolution of problems at the project level is best accomplished by the creation of a formal protocol that encourages a culture that supports the goal.?Each project stakeholder should designate one person, by name, to have responsibility for the resolution of problems and disputes at the project level. Once selected, the top executives of all stakeholders should meet jointly with the all designated individuals and communicate to them the importance of prompt resolution of problems and disputes and state their support for the principle as well as their expectation that the designated individuals will succeed in achieving this goal. The communication of that support from the top tier of company management is a critical element of this protocol.

The second rung of the dispute resolution protocol is the designation of a higher level person from each participant who will meet with the other designated persons if the field level representatives are unable to achieve a resolution within a stated time; e.g. say, within 5 business days of the date that the issue was raised. The protocol will state how many days this second rung has to resolve the matter. Those people designated at this level should meet with their counterparts and develop an understanding of and appreciation of each other before the process actually commences. The existence of a personal appreciation of each other leads to successful results.??

The third and final rung is the designation of a senior executive of each project participant who will meet with her counterparts if the lower levels have not achieved resolution within a specified number of days.?

The reality is that most employees wish to be successful in their positions. They do not want their superiors to consider them ineffective. Thus, when a person is designated to have the responsibility to find solutions, repeated failures to do so reflect badly upon that person and his counterparts in the process.?For that reason, this protocol should lead to more resolutions at the lower rungs which is the better resolution in any event.

Later in this chapter alternatives to contentious claims and disputes practices are discussed in the section about "ADR."