Resolving Complex Construction Cost And Time Disputes

Construction cost and time disputes can become quite complex with the disputants often fixed on very different positions, for issues that can require considerable analysis by even the parties to understand. Changing party perspectives and strongholds in order to begin the resolution process can require mediator expertise on the subject matter, and sometimes evaluative input.

1. Cost and time variables for a project

Construction time is typically dictated by the critical path events. Construction cost can range from agreement on scope, to labor rates, material and equipment costs, productivity, efficiencies, required supervision, management, overhead, current market conditions, and the production schedule being in line with the critical path. If the parties have different perspectives of what constitutes a project’s cost and time foundation, the disputing costs for each side can have a high range of differential. In many instances, even the parties’ representatives at the mediation are unaware of the real construction facts that are at root of the disputed differential.

2. Types of construction cost and time disputes

Some of the most common construction cost and time areas of dispute are:

I. Change order pricing and related time extension
II. Validity of change order requests
III. Project delay causes and liquidated damages
IV. Back charges for failed work performance
V. Progress payment percent of completion

3. Compounding the complexity by many individuals

Each of these cost and time dispute areas can be further expanded into issues that involve a multiple number of parties including owner, general contractor, subcontractors, architect, engineer, deputy inspectors, suppliers, etc. And each of these respective parties (or companies) can have multiple individuals involved such as project managers, superintendents, estimators, project engineers, foremen, risk managers, principals, etc. All this further increases the complexity of resolution.

4. Multiple conflict causation

Causes of these conflicts can originate from:

• Plan and specification deficiencies or misinterpretation
• Contract interpretation
• Bid addendums and bulletins
• Extra work orders
• Requests for information and the responses to them
• Shop drawings – time of submission and content
• Meeting minutes and the submission of them to parties
• Undocumented conversations at office or field
• The project schedule
• Misperceptions of field completed work
• Misinterpreted communication by person, phone, fax, email.

5. The resolution process

In general, construction disputes originate from a failure in either:

1) communication
2) understanding and interpretation
3) performance.

In order to get the parties to begin the path of negotiation, for a minimum they should understand:

a) the specific issues under dispute
b) where was the breakdown that caused the dispute (facts of the issues)
c) the other party’s position.

If these disputes are to be settled in litigation, arbitration or appraisal, the final decision will be based on one individual’s interpretation of the facts presented. But if these facts are not presented in clear and understandable format or the deciding individual has misinterpreted these facts, then an unfair decision or award can be made. But if a knowledgeable construction mediator can bring the parties into alignment on the true causes and associated costs of the conflict from a construction standpoint, it opens the door way for resolution inventiveness to be made by the parties.

6. Precautions

One key precaution for a construction mediator is to always maintain neutrality and impartiality, especially if the parties have requested an evaluative process in lieu of facilitative. With a building background, it is likely that the construction mediator will develop an opinion of the issue, something that needs to be closely controlled at all times to maintain a fair process.

                       

Curtis W. Driver

Curtis W. Driver has been a contractor and expert witness in Los Angeles and conducts construction mediations on cost and time related issues.   He has received the Certificate in Dispute Resolution from Pepperdine University.     MORE >