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Construction Contracts: Towards a New Relationship

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Construction Conflict Management and
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Construction Conflict
Management and Resolution
Edited by
PETER FENN and ROD GAMESON
University of Manchester
Institute of Science and Technology
(UMIST)
Proceedings of the First International
Construction Management Conference,
The University of Manchester
Institute of Science and Technology (UMIST),
25–27 September 1992
E & FN SPON
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Acknowledgements
The organizers gratefully acknowledge the special support of the following
organizations and firms in the sponsoring of the Conference.
International Council for Building Research,
Studies and Documentation (CIB)
The Centre for Dispute Resolution (CEDR)
Dibb Lupton Broomhead, Solicitors
High Point plc
Masons, Solicitors and Privy Council Agents
J.E. Price Associates, Construction Contracts
Consultants
FASS (The Federation of Associations of
Specialists and Sub-Contractors)
Contents
Contributors x
Referees xiv
Preface xv
PART ONE INTRODUCTION 1
Construction conflict: management and resolution—
analysis and solutions
A.Lavers
2
The construction industry
J.Newey
20
PART TWO CONSTRUCTION CONFLICT 24
Facing up to conflict in construction
M.C.G.Smith
26
Construction conflict—management and resolution
R.Baden Hellard
34
Managing disputes
C.A.Cree
46
Successful conflict management
R.V.Zikmann
53
Construction conflict—the specialist contractors
view
R.S.Davies
58
Contingency management of conflict: analysis of
contract interfaces
D.A.Langford, P.Kennedy and J.Sommerville
63
Avoiding conflict by risk management—the role of
the client’s project manager
J.Lewis, D.W.Cheetham and D.J.Carter
71
Resolving conflict in the formulation of building
design objectives
S.D.Green
93
The relationship between conflict, change and
project management strategy
P.D.Gardiner and J.E.L.Simmons
108
Karming conflict
R.Fellows
121
Contracts cause conflicts
S.R.Clegg
127
Construction management integration: an analysis of
the degree of integration between construction
professionals and project performance
P.Turner-bright
145
The French approach to handling conflicts and to
negotiating: certain notable features
C.A.Leeds
152
Substantive techniques for conflict resolution:
aggregate extraction in southern Ontario
D.C.Baker and A.G.McLellan
163
“Do it yourself homes”—more or less conflict
problems”
C.Cosma
174
Transition and management of uncertain resolution
R.Lupasteanu and E.Antohie
180
PART THREE CLAIMS LITIGATION AND ARBITRATION 186
Adjudication procedures: a temporary diversion
B.Bentley
187
Can construction claims be avoided?
S.G.Revay
203
Review of Australian building disputes settled by
litigation
V.M.Watts and J.C.Scrivener
210
Costs in arbitration proceedings
R.W.Quick
221
Construction contracts: towards a new relationship 231
vii
B.Colledge
Construction contractors liability in Saudi Arabia
Sadi A.Assaf and Abdulmohsen Al-Hammad
250
The role of integrated cost and time models in
conflict resolution
P.H.McGowan, R.M.W.Horner, R.Zakieh, D.Jones
and P.A.Thompson
255
The position of materials re payment and ownership
in construction projects in the UK
G.Bowles and H.A.Gow
269
Statistical modelling of claims procedures and
construction conflicts
D.Dalton and N.Shehadeh
275
PART FOUR ALTERNATIVE DISPUTE RESOLUTION 286
Mediation, the experience in the United States
C.A.Cooper
287
Alternative dispute resolution—a far east
perspective
A.Houghton
296
Alternative dispute resolution and construction
disputes
K.J.Mackie
300
The problems of using ADR in the construction
industry
D.R.Miles
305
Mediation and mini-trial of construction disputes
T.Stipanowich and D.A.Henderson
314
The dispute resolution adviser in the construction
industry
C.J.Wall
328
Whither small value residential dispute settlement
in Australia?
I.Eilenberg
342
Peace, love and harmony
M.P.Nicholson
349
viii
The use of mini-trials to resolve construction
disputes
G.J.Siedel
356
FIDIC study on amicable settlement of construction
disputes
D.E.Hollands
364
PART FIVE EDUCATION 369
Managing conflict in organizations
M.A.Rahim
370
Planning for disputes—educating construction
management
D.F.L.Bishop
380
Conflict in the context of education in building
ethics
M.Powell
389
Educating construction professionals to improve the
built environment
M.Hancock
400
Construction conflict management—the role of
education and training
J.Franks
406
The construction industry’s male culture must
feminize if conflict is to be reduced: the role of
education as gatekeeper to a male construction
industry
A.W.Gale
416
Index of Keywords 428
ix
Contributors
KEYNOTE SPEAKERS
His Honour Judge J.Newey QC
Senior Official Referee, London, UK
R.Baden Hellard
Polycon Group of Consultants, London, UK
C.Cooper
American Arbitration Association/The Asia/Pacific Center for the Resolution
of Internations Business Disputes, San Francisco, USA
A.Houghton
Des Voeux Chambers, Hong Kong
Dr A.Lavers
Fishburn Boxer Reader in Law, Department of Estate Management, Oxford
Polytechnic, UK
Dr K.Mackie
Chief Executive of the Centre for Dispute Resolution, London, UK
D.Miles
Partner, Glovers Solicitors, London, UK
Professor A.Rahim
Department of Management, Western Kentucky University, USA
M.Smith
High-Point, Birmingham, UK
AUTHORS
E.Antohie
Department of Management, Polytechnic Institute of Iasi, Romania
Dr Sadi Assaf
College of Environmental Design, King Fahd University of Petroleum &
Minerals, Dhahran, Saudi Arabia.
Dr Abdulmohsen Al-Hammad
College of Environmental Design, King Fahd University of Petroleum &
Minerals, Dhahran, Saudi Arabia.
D.Baker
Faculty of Environmental Studies, University of Waterloo, Ontario, Canada
B.Bentley
Dibb Lupton Broomhead, Sheffield, UK
D.Bishop
David Bishop Associates, Doncaster, UK
G.Bowles
Department of Civil Engineering, Surveying & Building, Dundee Institute of
Technology, Dundee, UK
D.Carter
School of Architecture & Building Engineering, University of Liverpool,
Liverpool, UK
D.Cheetham
School of Architecture & Building Engineering, University of Liverpool,
Liverpool, UK
Professor S.Clegg
Department of Management, University of St Andrews, St. Andrews, UK
B.Colledge
School of the Environment, Leeds Polytechnic, Leeds, UK
C.Cosma
Department of Management, Organisation and Building Economics,
Polytechnic Institute of Iasi, Romania
Dr C.Cree
Coopers & Lybrand Deloitte, London, UK
D.Dalton
Department of Civil Engineering, University of Leeds, Leeds, UK
R.Davies
Federation of Associations of Specialists & Sub-contractors (FASS),
Stevenage, UK
I.Eilenberg
Department of Building & Construction Economics, Royal Melbourne
Institute of Technology, Australia.
Dr R.Fellows
School of Architecture and Building Engineering, University of Bath, Bath,
UK
J.Franks
xi
School of Building Services and Construction Management, South Bank
University, London, UK
A.Gale
Department of Building Engineering, University of Manchester Institute of
Science and Technology, Manchester, UK
P.Gardiner
School of Engineering and Computer Science, University of Durham, UK
S.Green
Department of Construction Management & Engineering, University of
Reading, Reading, UK
H.Gow
Department of Civil Engineering, Surveying and Building, Dundee Institute of
Technology, Dundee, UK
M.Hancock
School of Architecture & Building Engineering, University of Bath, UK
Professor D.Henderson
College of Law, University of Kentucky, USA
D.Hollands
Arbitrator & Mediator, Auckland, New Zealand
Professor M.Horner
Department of Civil Engineering, University of Dundee, Dundee, UK
D.Jones
Department of Civil & Structural Engineering, University of Manchester
Institute of Science and Technology, Manchester, UK
P.Kennedy
Department of Building & Surveying, Glasgow Polytechnic, Glasgow, UK
Professor D.Langford
Barr Chair of Construction, University of Strathclyde, UK
Sir C.Leeds Bt
Universite de Nancy II, France
J.Lewis
School of Architecture & Building Engineering, University of Liverpool,
Liverpool UK.
R.Lupasteanu
Department of Management, Polytechnic Institute of Iasi, Romania
P.McGowan
Department of Civil Engineering, University of Dundee, Dundee, UK
A.McLellan
xii
Faculty of Environmental Studies, University of Waterloo, Ontario, Canada
P.Nicholson
School of Architecture, University of Nottingham, UK
M.Powell
Department of The Built Environment, Anglia Polytechnic, Essex and
Cambridge, UK
R.Quick
Morris Fletcher & Cross, Brisbane, Australia
S.Revay
Revay and Associates Limited, Montreal, Canada
Professor J.Scrivener
Department of Architecture and Building, University of Melbourne, Australia
Dr G.Siedel
School of Business Administration, The University of Michigan, Ann Arbor,
Michigan, USA
Dr N.Shehadeh
Department of Civil Engineering, Leeds University, Leeds, UK
J.Simmons
Department of Mechanical Engineering, Heriot-Watt University, Edinburgh,
UK
J.Sommerville
Glasgow College of Building and Printing, Glasgow, UK
Professor T.Stipanowich
College of Law, University of Kentucky, USA
Professor P.Thompson
Department of Civil & Structural Engineering, University of Manchester
Institute of Science and Technology, Manchester, UK
P.Turner-Wright
Leadbitter, Oxford, UK
C.Wall
Commercial, Mediation & Arbitration Services Limited, Hong Kong
V.Watts
Department of Architecture and Building, University of Melbourne, Australia
Dr R.Zakieh
Department of Civil Engineering, University of Dundee, Dundee, UK
R.Zikmann
Zikmann & Associates, Sydney, Australia
xiii
Referees
Michael O’Shea
Masons Solicitors, Manchester
Dr Will Hughes
University of Reading, Reading, UK
Richard Collins
New South Wales, Australia
Colin Wall
CMA, Hong Kong
Professor Aldo Norsa
Institute Universitario di Architettura di Venezia, Italy
Claude Mathurin
Engineer, Place de la Madeleine, Paris
Vera Van Houtte
Advocate, Netherlands
Sebastian Toombs
Royal Incorporation of Architects in Scotland, Edinburgh, UK
Professor D Bishop CBE
St Albans, UK
Professor Gerard Blachere
France
Professor Colin Davidson
University of Montreal, Montreal, Canada
Hans Sundstrom
AB Bostadsgaranti, Sweden
Antonio C Canda
Consejo General de Colegios, Madrid, Spain
Fleming Lethan
Ministry of Housing & Building, Denmark
Professor Kunio Kawagoe
Japan Building Equipment, Tokyo, Japan
Preface
The aim of this book is to examine and investigate techniques involved with the
management and resolution of conflict arising in construction projects, both in
the United Kingdom and around the world. Papers have been received from ten
countries. The book has been produced with a number of objectives in mind.
Firstly, it is hoped that readers will be provided with a greater understanding of
the field having been exposed to the views of experienced practitioners.
Secondly, it presents an opportunity for academics to disseminate their research
findings. Finally it acts a source of reference to be consulted in connection with
professional practice, research and teaching.
Papers have been grouped into topic areas which reflect the key areas of
construction conflict. Part One begins with a rapporteur section, by Anthony
Lavers, which reviews the papers and provides a summary of the key points
emerging from them. This is followed by a keynote paper by Judge John Newey
QC. Part Two considers numerous aspects of how conflict can be managed
through the many phases of a project.
Part Three deals with established adjudicative procedures for dealing with
conflict, and Part Four looks at emerging methods for resolving disputes,
collectively termed Alternative Dispute Resolution (ADR).
Finally, Part Five concentrates on educational issues and considers methods to
be utilised to prepare professionals to deal with conflict more effectively.
Like any construction project, the production of this book has been a team
effort. Therefore we would like to thank the following people for their
contributions. Firstly, the authors who contributed papers. Secondly, Anthony
Lavers for producing the rapporteur section. Thirdly, our panel of referees for
scrutinising the papers, and finally, Moira Kynnersley and Lisa Kerfoot for their
invaluable assistance in the editing, collating and production of the final version
of this book.
The book will be launched at an International Conference on Construction
Conflict held at UMIST, Manchester, in September 1992, where a number of the
papers will be presented. This will provide a forum where professionals and
academics can debate this important area.
Peter Fenn and Rod Gameson
Part One
Introduction
This section introduces the theme of construction conflict setting the scene for
the remainder of the book.
‘Construction conflict: management and resolution—analysis and solutions’
(Lavers) is a rapporteurs report on the overall content of the book, which
attempts to draw together themes and conclusions from the numerous approaches
proffered by the authors.
‘The Construction Industry’ (Newey), the conference opening address,
discusses the nature of construction conflict and disputes.
CONSTRUCTION CONFLICT:
MANAGEMENT AND RESOLUTION
ANALYSIS AND SOLUTIONS
ANTHONY LAYERS
School of Estate Management, Oxford Polytechnic, U.K.
Abstract
This paper attempts to draw together the principal themes of the UMIST
First International Conference on Construction Conflict: Management and
Resolution and to identify the most important perspectives of the papers
presented. The subjects covered include the phenomena of conflict and
their management, experiences of traditional resolution mechanisms ie
litigation and arbitration. Alternative Dispute Resolution (ADR) and
education/attitude changes.
Keywords:
Conflict, Construction Disputes, Conflict Management, Conflict
Resolution, Construction Litigation, Arbitration, ADR, Alternative Dispute
Resolution, Construction Education.
1
Introduction
The analysis and solutions of the title of this paper are not mine. They are those
advanced by the authors of the papers at the UMIST First International
Construction Management Conference on Construction Conflict: Management
and Resolution. My role in this paper and at the Conference is to try to draw
together themes and conclusions from the individual approaches of the respective
authors. The themes of this paper are loosely based upon those used for
classification of the papers for presentation (where appropriate) and for
publication, namely Construction Conflict, Claims, Litigation and Arbitration,
Alternative Dispute Resolution (ADR) and Education and Attitude Change.
2
Background
The background against which this conference is held is of a process and an
industry in which conflict has risen significantly over the last three decades.
Commentators who have attempted to quantify the extent of conflict are agreed
that this has increased, although there are sub-trends which are worthy of note.
Peter Fenn
1
, in a paper referred to by Fellows
2
saw a 500% increase in
the initiation of litigation in the twenty years to 1986, although cases actually
coming to the courts remained approximately constant, which may of course be
merely descriptive of their capacity and of the fact that they are working at or
near it. Judge Newey’s figures
3
show a 100% increase in litigation in the period
1973–80 with increases of approximately 15% per annum in the period 1980–89.
Judge Newey, in this paper ascribes the increase in litigation and arbitration at
least in part to “changes in Common and Statute Law which have made it easier
to bring claims”. Certainly this would be consistent with his figures for 1990 and
1991 which show no increase and a decrease in litigation respectively, which
could be seen partly as the result of the brake being applied to negligence claims
in tort as a result of D and F Estates v Church of England Commissioners
4
,
Department of Environment v Thomas Bates
5
and Murphy v Brentwood District
Council
6
. This sub-trend, although welcomed in some quarters, should not be
over-estimated: absence of tortious remedies has created the collateral warranty
explosion and viewed from another angle can simply leave injured parties
uncompensated. In any event, a reduction in litigation observable from the
Official Referees Court does not mean a commensurate reduction in conflict and
dispute, nor was Judge Newey suggesting that it does. His reference to
companies in liquidation making litigation unprofitable to pursue is surely right
and does not indicate a lessening of conflict.
So, the background is one of conflict and of dispute, some of which ends in
formal claims, in litigation or arbitration, which is the subject of Section 4 of this
paper. Whether this is inevitable or avoidable, positive or negative is discussed in
several papers referred to in Section 3 below.
There is dissatisfaction with the existing traditional mechanisms for resolving
disputes. That fact underlies many of the papers in Sections 4 and 5 and is
strongly articulated by Davies
7
taking the view of specialist contractors and sub-
contractors in bemoaning “the arrival in strength of the legal profession” in
construction disputes in the early 1980s. It should be noted here that there is a
dispute in taxonomy as to what constitute ‘traditional’ and what ‘alternative’
methods. Whereas the majority of authors assimilate arbitration to litigation to
distinguish from ADR, Eilenberg
8
says that ADR “is regarded as including
arbitration”. If excessive legalism is perceived as central to the problem
9
, the
degree of involvement may be used as an indicator to assist in the classification.
Thus the informal tribunals mentioned by Eilenberg in the State of Victoria as
excluding legal representation could properly be regarded as part of ADR,
whereas similar mechanisms with professional advocates and expert witnesses
could be regarded as quasi-litigation; part of the traditional method of resolving
disputes to which an alternative is sought. Normally, then arbitration should be
assimilated with litigation (and it is, throughout Sections 3, 4 and 5 of this paper),
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 3
unless features are built into it, such as the exclusion of legal representation,
which prevent it acquiring the characteristics mentioned above.
Because of the dissatisfaction with traditional methods of conflict resolution in
the construction industry, a wide range of options has been and continues to be
explored. The attention of the authors of the papers referred to in Section 6 of
this paper is concentrated on the earliest chronological stage of the continuum of
a construction project, namely the education and training of the personnel who will
be involved, especially the professional consultants. Hancock
10
states that
“problems and conflicts within the construction industry are a result of
misunderstanding and a lack of perception founded in our education of
construction industry professionals”. The basic belief of these authors is that the
inculcation of different attitudes can help avoid conflict. The second stage,
chronologically, also depends upon avoidance of conflict, more mechanistically
through selection and tuning of procurement vehicles; the contractual and other
relationships between the parties in a construction project. Colledge
11
in
particular sees the commercial and contractual relationships between the parties
as fundamental to a reduction of conflict and several papers propose techniques
for avoidance of disputes through better or more systematic preparation and
communication. A simple example of the latter is supplied by Judge Newey: “if
an untried technology is to be used, the Employer should be warned and his
consent obtained”
12
. This suggestion is, of course, redolent of Judge Newey’s
decision in Victoria University of Manchester v Hugh Wilson
13
: based on the
simple truth that there is less room for subsequent disagreement if the designer
‘takes the client with him/her’.
The next stage assumes that disputes do arise notwithstanding efforts to avoid
them, but seeks to reduce any harmful effects. Dispute management is advocated
as a means of recognising conflict and dealing with it efficiently. Rahim
14
states
that “Organisational conflict must not necessarily be reduced, suppressed or
eliminated, but managed to enhance individual, group and organisational
effectiveness”. This view can be characterised as ‘pragmatic’ ie accepting the
inevitability of disputes and concentrating on their management rather than their
complete eradication (although not excluding minimisation).
While it would be artificial and in some situations simply wrong to distinguish
between management and resolution of disputes, a difference of emphasis can be
observed in some papers between handling a dispute as it arises and its eventual
outcome. Baden Hellard
15
advocates the appointment of a contract management
adjudicator and the idea of an interim reference point to foresee, identify and
manage points of disagreement is explored in more detail by other authors,
perhaps most interestingly by Wall
16
(under the heading of ADR) who records the
implementation of such a system in Hong Kong. There may here be a difference
of taxonomy between those who see this referee as managing disputes as they
arise and those who see the purpose as resolution of disputes which have arisen,
albeit in an early form. It is not likely that both would be used in the same
4 CONSTRUCTION CONFLICT
project and they can properly be regarded as different versions of similar
concepts.
Ultimately, on any meaningful analysis of the industry at present, disputes will
arise which cannot be nipped in the bud. Valuable work has been done on
improving conflict resolution by the authors of these papers. There is research on
existing systems of litigation and arbitration such as Quick’s paper
17
on
arbitration costs and the Watts and Scrivener
18
paper reviewing construction
litigation in the Supreme Courts of New South Wales and Victoria and the Court
of Appeal of Australia. There are, of course, advocates of ADR systems, led by
Cooper
19
and Mackie
20
, and there are papers from five countries in this section
which offer instructive comparisons in approach. There are proponents too of
conflict resolution methods which appear novel but which are in reality older
even than litigation and arbitration. Houghton
21
in his view of the Far East
speaks of “the Chinese perspective of compromise”, and other authors, including
Nicholson
22
have seen the advantages in looking at less antagonistic practices
from older, often oriental, civilisations. The reasons for this preference for the
avoidance of open conflict may be cultural. Koh Kim Chuan
23
observed this
well-known but little understood phenomenon in 1981 when he described “our
Chinese mentality” which “abhors any attendance in the Court of Law” and
explained this in terms of ‘face’: “‘maintaining one’s face’ or ‘giving one’s
opponent face’ have much to do with the tendency not to bring disputes into the
open”.
The background to this Conference then can be summarised as consisting of
three propositions. First, there is a perceived growth, subject to some sub-trends,
in conflict in the construction industry. It is salutary and perhaps even sad to note
Houghton’s
24
statement “There is no doubt…that throughout South East Asia,
with states such as Hong Kong and Singapore in the forefront, there is a tendency
to follow the current western thinking and to have disputes resolved by third
party intervention” although there are also signs of modern alternatives. So
conflict is a feature of the international industry.
Second, there is dissatisfaction with existing legal and legalistic methods of
conflict resolution, chiefly litigation and, often, arbitration. While their perceived
deficiencies vary between jurisdictions, they are generally seen as frequently
very costly, time-consuming, inconvenient and tending to intensify and
exacerbate existing conflict, to the detriment of working relationships.
Third, research is being conducted by scholars from many nations and a wide
range of disciplines and professional backgrounds to find better ways of dealing
with the phenomena of conflict: education, contractual and systemic avoidance,
management and improved as well as alternative forms of dispute resolution.
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 5
3
The phenomena of construction conflict and conflict
management
This sub-heading is used advisedly, because it cannot be said that there is a
single phenomenon of conflict. A dispute between a contractor and a client, or
the client’s architect, over a loss and expense claim is qualitatively different from
a tenant seeking to sue an engineer in tort following a major structural failure.
Aspects of conflict will vary with different types and sizes of project, different
procurement systems, different legal regimes and different personnel.
Nevertheless, this by no means renders the study of conflict useless, although
it makes generalisation difficult. On the contrary, the authors of the UMIST papers
are in broad agreement that understanding of conflict is fundamental to an ability
to identify disputes at a stage when it is still possible to avoid or manage their
development. Zikmann
25
emphasises the importance of understanding conflict
and adopts an analysis which embraces interest conflicts, structural conflicts,
value conflicts, relationship conflicts and data conflicts. On the question of
whether some form of conflict in construction is inevitable, the preponderance of
opinion is that it is. Smith
26
is clear on this point: “Construction conflicts are…
endemic in the industry. The reasons for them flow from the way the industry
functions”. Baden Hellard
27
agrees that “conflict is a particular feature of
construction” and cites the existence of some 94 different standard contract
forms in the U.K.industry as a major contribution to this inevitability. Clegg
28
develops this further. He answers Fenn’s question
29
: “Why do a substantial
percentage of construction contracts end in serious dispute?” with the conclusion
“Because it is rational for them to do so”. Clegg refers to the tendency of
contracts to generate dispute because of the externality of interpretation;
contracts cannot “specify their own indexicality” by providing how they will be
read of used. Langford, Kennedy and Sommerville
30
agree that “conflict between
contracting companies may be inevitable”.
This majority view, that the nature of the construction process makes conflict
inevitable in some form, to some extent, can be characterised as ‘pragmatic’, as
contrasted with the ‘long-term strategic’. The former says ‘conflict exists and
will continue to do so. We will avoid and reduce it where possible, but the central
question is, how do we deal with it?”. The ‘long term strategists’ including
several of the authors in the Education section, do not find the inevitability of
conflict a positive or fruitful subject and concentrate on tackling root and branch
the attitudes and practices in the industry and its professions which generate
disputes.
Given that the existence of a degree of conflict is necessary, is this essentially
negative? Certainly, the authors generally concentrate on the damaging effects of
conflict. All of the papers on avoidance of disputes are predicated upon negative
consequences following from them. Turner-Wright
31
sees “diminishing project
performance levels induced by non-interaction, frustration and non-aligned
6 CONSTRUCTION CONFLICT
perceptions of each other’s and the project’s goals” and Colledge
32
comments on
the poor recent record of the industry “with respect to its performance and
achievement of time and cost objectives”. The NEDO Reports
33
have also seen
conflict as a damaging factor in the construction process and these are cited by
Colledge as well as by Smith and others. But Smith sees the tension of the
contractual relationship as not only inevitable but to some extent functional. He
distinguishes functional from dysfunctional conflict, which is consistent with
Rahim’s view
34
that it is management not suppression or even reduction of
conflict which is crucial. His espousal of Partnering is not inconsistent with this
position; creative tension between partners is an acknowledged phenomenon.
Gardiner and Simmons
35
also classify functional and dysfunctional conflict and
speak of the possibility of a project manager being able to “harness the
functional outcome of conflict, resulting in project change for the better; and
limiting the damage done by dysfunctional conflict”.
The measures proposed for dealing with dysfunctional conflict can be
conveniently although not restrictively, divided into avoidance/minimisation and
management. To regard the two as mutually exclusive would be to
misunderstand those papers such as Baden Hellard’s
36
and Revay’s
37
which see
dispute avoidance as part of an integrated conflict management strategy. As
Revay puts it “conflict management does not start when the dispute first raises its
ugly head”. Nevertheless, it may be useful to differentiate between work which
is centred upon avoidance/minimisation and that which relates to handling
disputes if the avoidance techniques fail or break down. Certainly choice of an
appropriate procurement method is part of the avoidance/minimisation range.
Colledge
38
, as has been mentioned, proposes an economic model which enables
the adoption of a transaction specific approach to forming contractual
relationships. Certain types of procurement method can be said to avoid certain
types of conflict. Nicholson
39
recommends Build Operate Transfer in appropriate
cases, where the contractor operates the building or facility constructed for an
agreed period in order to generate the revenue to pay the contract sum, before
transferring it to the client for a nominal amount. Cosma
40
sees the marketing of
kit-form houses for self-build as a way of avoiding time and payment disputes
which an individual owner and small-scale contractor might find difficult to
resolve cheaply and efficiently. This is not potentially applicable only to
Rumania, where Cosma’s work was done; she notes that in the United States 20%
of single family residences are built by home-owners, a sector where total or
partial transfer of work from contractor to client may well be beneficial in
conflict avoidance. But it is not only the type of procurement method selected
which may be relevant to conflict avoidance. The substance and, indeed, the
spirit of the contract may also be of great importance. Fellows
41
concludes that
“hard, bad, unfair bargains” work against the interests of the construction
industry and those who work in it. He ascribes this to the law of Karma, but the
legal system may produce exactly the same effect. Seeking to exact too heavy an
imposition from the other side may not operate as intended. In Rosehaugh
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 7
Stanhope v Redpath Dorman Long
42
and Beaufort House Development v
Zimmcor International
43
the UK Court of Appeal declined to give effect to a
purported provision in a construction management arrangement which would
have given the clients’ construction managers absolute discretion to determine
what loss had been occasioned by delay and to claim immediately for it. The
Court of Appeal felt that such a provision was so potentially onerous upon the
contractor that if should not be enforced, by reason of the contra proferentem
rule
44
. This does not mean that construction management needs be rejected
outright, although Revay
45
would have it so, since he sees it as a source for
conflict. It is meant to emphasise that a more balanced agreement is a preferable
option as a means of avoiding conflict. Had the clients in these cases not
attempted to impose such onerous provisions, the contract would have arguably
been enforceable in full before the courts.
The majority of Conflict papers, however, concentrate on management of
conflict rather than avoidance itself, either expressly by advocating the adoption
of management systems or techniques or implicitly by recommending
approaches which could be utilised in a management strategy. Basic requisites of
management of conflict according to Rahim
46
are diagnosis and intervention.
Diagnosis may well be facilitated by the use of classifications of conflict such as
those used by Zikmann
47
and Gardiner and Simmons
48
. Also of value in
diagnosis of conflict may be data on the most likely sources. Revay
49
gives a list
of most frequent causes for claims which are mainly client deficiencies or
consultant deficiencies. This is Canadian research. Watts and Scrivener
50
have
several categories of sources or dispute in their Australian data which suggest
contractor deficiencies (or alleged deficiencies), as well, indeed their data shows
15% of all disputes arising from alleged contractor/sub-contractor deficiencies
resulting in attempted determination. Rahim’s other requisite for intervention, is
supported by Zikmann,
51
who distinguishes between aggressive and creative
responses as types of active response to conflict and recommends that “The
emphasis is on identifying creative and workable solutions which can satisfy the
needs and dispel the fears of the parties involved”. Both Cree
52
and Lewis,
Cheetham and Carter
53
see conflict management as susceptible to a project
management approach, indeed the former paper assimilates disputes with
projects. The reasoning proceeds thus: disputes can be regarded as projects,
projects need management, disputes need project management. Cree proposes a
decision tree to optimise choices in the project management of a dispute. The
Lewis, Cheetham and Carter paper refers to Risk Management as one of the
capabilities required of the Client’s Project Manager and consistently with
Rahim’s recommendation, gives three phases of Risk Management: risk
identification, risk analysis and risk response. Fellows adds a fourth, viz risk
allocation. Lewis, Cheetham and Carter’s paper adduces a project as an
illustration of this approach, namely an Anglican vicarage in a New Town in the
North West of England. The hall-mark of their approach is a qualitative not
quantitative analysis.
8 CONSTRUCTION CONFLICT
Attitude is widely regarded as crucial in intervention. On the positive side
there is an insistence by some authors upon an integrated and integrative
approach. Langford, Kennedy and Sommerville
54
set out to explain “Informed
project management” with a capacity for anticipating zones of conflict with team
members “bound together by mutually set, internalised goals, rather than by
contractual arrangements alone”. Fellows
55
continuing his argument against the
competitive ethos of the construction process seeks a recognition “that
all involved are in business with operational imperatives which have some degree
(s) of commonality”. Turner-Wright
56
too speaks of “the need for a higher degree
of integration within a construction site management team”.
On the negative side concern is expressed by some authors at the attitudes of
some personnel involved in the management process. Lapusteanu and
Anthohle’s paper
57
contains some apparently pessimistic observations on the
continuity of problematic management attitudes between communist and post-
communist Rumania where the personnel are often the same as before. Leeds
58
expresses reservation about French style in managing conflicts, which he
characterises as inflexibility in negotiation, the adoption of unyielding positions
and abrupt termination of discussions. These characteristics arise from French
dislike of compromise, which suggests to a French negotiator a ‘lose-lose’ result,
with neither side satisfied. Compromise can come to mean a “dishonest
opportunistic or shady deal” (une compromission) or a flawed result (un
compromis boiteaux). It must here be said that Leeds regards the record of the
French industry on conflict avoidance rather than management as much stronger,
and he too sees a more optimistic development in the last 25 years of a
preference for ‘concertation’, being integration to minimise the effects of
conflict. Perhaps the gravest reservations about attitudes of personnel concerned
are expressed by Davies
59
, who sees the central role of the legal professions as
inconsistent with efficient conflict management and whose contribution might
have found favour with Jack Cade’s supporter, Dick, the butcher of Ashford
60
.
The positive proposals are carried forward into specific techniques. Baker and
McLellan
61
, dealing with an especially emotive and polycentric form of dispute
concerning mineral extraction in Canada, see dispute management as the creation
of windows of opportunity for the mutual exchange of incentives and
concentration upon the satisfaction of the aspirations and objectives of the other
party(ies) as a means of obtaining a settlement. Of the most specific techniques or
tools put forward for dispute management, mention has already been made of the
decision tree of Cree
62
, the method of analysis of Lewis, Cheetham and Carter
63
and the model indicating variables in main-contractor sub-contractor relationships
of Langford, Kennedy and Sommerville
64
. To these should be added Green’s
65
proposal of a formal decision-making model for use during the briefing/outline
design stages. Green suggests how the model might work through a case study of
a new laboratory; the primary objective being the establishment of a shared
understanding of design objectives, rather than what the paper describes as
unrealistic objectives of optimisation or maximisation of value.
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 9
4
Claims, litigation and arbitration
The overriding question posed by the inclusion of this section in the UMIST
Conference is that posed by Smith
66
in his expectation that authors “will
further question whether the existing dispute resolution systems can live up to
the expectations raised” (by perceptions of enforcement of rights and
obligations). In short, can the existing mechanisms, chiefly litigation and
arbitration be made to work, or at least to work better, in resolving claims and
other disputes? Three of the papers in this section offer specific and detailed
proposals for improving the operation of existing conflict-resolution
arrangements. Of these, Colledge’s
67
economic model of commercial
relationships can be regarded as an attempt to make construction contracts work
better as anticipations of and provision against conflict, by adopting a
transaction-specific approach. McGowan el al
68
have produced a paper which
identifies the need to evaluate systematically the effects in terms of time and cost
of variations and other changes, desired or enforced. Their solution is an
application of the concept of ‘resource significance’, based on the premise that
the capacity to separate material costs from resource/fixed costs is fundamental
to objective evaluation and thus the possibility of settlement. This paper
advocates a particular contractual regime, namely the New Engineering
Contract, (presumably, in appropriate cases) as creating the right environment to
permit such a process.
Bentley
69
advocates the wider use of a known technique, namely adjudication,
not as an alternative to current procurement and dispute resolution methods but
as a valuable addition to existing provision. He notes with approval the presence
of adjudication clauses in a growing number of major standard form contracts
and sees certain features of the technique as highly beneficial. Most notably, the
ability to obtain interim decisions, during the continuation, of the project, within
a short time scale, which are binding until subsequent litigation or arbitration,
may reduce the, potential damage caused by conflicts. Bentley concludes that,
while ultimate success will depend upon the attitudes of the protagonists (and the
Courts), “there seems little doubt that adjudication has merit as a dispute
resolution procedure, offering benefits not otherwise available in the traditional
procedures”. An affinity may be remarked between some forms of adjudication
and the Dispute Resolution Adviser discussed by Wall
70
, which is referred to in
Section 5 below.
The other papers in this Section can be regarded as descriptions and analyses
of existing arrangements for dispute resolution and their characteristics,
especially characteristic deficiencies. Assaf and Al-Hammad
71
give an account
of the contractual provisions for dispute resolution in Saudi Arabia’s 1988
Standard Public Works Contract. Points of interest here are the provisions for
calculation of liquidated damages, which in some respects seem to be regarded
as closer, and acceptably so, to a penalty, with an upper limit on the total payable
10 CONSTRUCTION CONFLICT
of 10% of the value of the contract. There is provision for reference of disputes
as to interpretation of contract which cannot be resolved mutually, to the Board
of Grievances (Diwan Al-Mathelem) for final judgement. Watts and Scrivener
72
,
a doctoral research student/supervisor team have already produced important
data on sources of dispute, including sub-groups referring to causes, and on
‘triggers’ which bring the dispute to litigation. The second stage of the ongoing
research is to focus on documentation weaknesses and failure in administration
techniques. Documentation weaknesses are identified by Revay
73
as area
requiring improvement to achieve better dispute avoidance, and this second stage
may also yield significant results. Quick
74
has produced a detailed analysis
including extensive case law, of the application of the so-called ‘English Rule’
(ie the costs follow the judgment) and the ‘American Rule’ (ie parties bear their
own costs, win or lose) in UK and Australian arbitration proceedings. Quick sees
attempts to displace the remarkably durable ‘English Rule’ by repeated
experiments in the UK and Australia with the ‘American Rule’ as a form of
‘Costs ADR’, although he notes recent modifications in the US operation of the
‘American Rule’ which ironically bring it closer to the ‘English Rule’.
5
Alternative Dispute Resolution (ADR)
The authors whose papers are included in this section explore and in varying
degrees advocate a range of dispute resolution models and techniques. They are
all properly classified as ADR. The doubt of the Master of the Rolls “whether
there is any such thing as ADR” quoted by Miles
75
is respectfully rejected. The
models and techniques discussed are alternatives to litigation and, despite
Eilenberg’s reservation, mentioned in Section 2 above, to arbitration. Mackie
76
offers ‘Appropriate’ instead of ‘Alternative’ Dispute Resolution, which has some
attractions, but may minimise the force of the distinction with litigation/
arbitration.
The best known forms of ADR may be taken to be mediation and conciliation.
Both are well documented, especially as a result of comparatively extensive use
in the United States and consequently none of the papers offers straightforward
description of these models. Stipanowich and Henderson,
77
do however seek to
rebut the principal anecdotal criticisms of mediation (and of mini-trials) and in
doing so re-assert some of the strengths of these ADR models. The principal
criticisms which they tackle are that there is a damaging admission of weakness
in seeking to explore alternative models and that mediation (and mini-trial) reveal
trial strategies and information. The research for the Forum on the Construction
Industry and Litigation Section of the American Bar Association carried out by
the University of Kentucky College of Law rejected both criticisms decisively.
Mediation was seen as appropriate where the parties wish to maintain an ongoing
relationship, where privacy and confidentiality were important, where a quick
resolution was needed and where an economical process was needed by both
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 11
parties. Mini-trial was seen as offering similar advantages but was relatively less
favoured. These models were regarded as inappropriate where the dispute
involved a novel question of law, where the credibility of witnesses was at stake
or the good faith of the other side was seriously in doubt.
Nicholson
78
, while approving the harmony engendered by the “Japanese
cultural heritage of non-argument” adopts de Bono’s view that to “replace
the dialectic argument system of conflict resolution with a new idiom” the
“intervention of a third party is essential”. Mackie
79
and Cooper
80
proffer similar
views as to the essential personal qualities of the mediator. Cooper regards the
mediator as the ‘agent of reality’ who forces the disputants to review the
situation since “No dispute can settle until one or both parties begin to question
their belief in their own position” Mackie, too, wants the mediator to take a
“high-profile, active part in negotiations”.
ADR is seen as especially valuable for the smaller scale disputes where cost of
traditional options for resolution may be prohibitive. Quick
81
found no evidence
for the assertion that ADR could operate for around 3% of the cost of arbitration,
but Miles’ paper
82
expresses strongly the concern felt as to how disputes for
sums below £50,000 or even £100,000 can be economically conducted by
traditional means. The managing director of a leading UK developer is known to
have said (perhaps unwisely) that his firm would be unlikely to pursue litigation
all the way to the High Court for under £250,000. It is at these modest levels that
the work of Eilenberg
83
on low-cost, small-value Residual Dispute Settlement in
the State of Victoria will be of interest. The exclusion of legal representation and
a costs structure designed to discourage the use of expert witnesses keeps the cost
to the parties to less than £100 per day each.
Siedel
84
comes the closest of any paper to an exposition of the workings and
merits of a whole ADR system with the review of mini-trial. There is a possible
contradiction between Siedel’s assertion that mini-trial is “considered by many
experts to be the most successful of the new methods of alternative dispute
resolution” and the findings of Stipanowich and Henderson
85
that mediation was
generally preferred to mini-trial. Perhaps mediation in the US is not to be
regarded as a new method of ADR whereas mini-trial is. Probably more
significant in Siedel’s paper is the account of the use of the ADR Pledge. 500 of
the top US and US based multi-national corporation have now signed pledges
which bind them, in good faith rather than law, to explore negotiation or ADR
before pursuing litigation, with any party which has made a similar statement.
Siedel includes precedents of the formula of the wording for these ADR pledges,
which may be a powerful influence upon the behaviour of corporations with
‘clean’ images to maintain.
In a similar way, Hollands
86
reports on the inclusion of ‘Amicable Settlement
Clauses’ in the 1987 editions of the FIDIC Civil Engineering and Electrical and
Mechanical Engineering Contracts which oblige the parties to come to the
negotiating table to attempt the tasks of “identifying problems, establishing facts,
clarifying issues, developing settlement options and reaching agreement”. This
12 CONSTRUCTION CONFLICT
may sound optimistic, but Hollands readily concedes that it may not achieve
these aims where relationships are seriously soured or where one party has no
intention of settling. The value of an obligation to seek amicable settlement is
that it is a ‘window of opportunity’ for the parties to limit losses, contain damage
and preserve working relationships, while retaining control over the process.
The most difficult paper to classify is Wall’s
87
, because the Dispute Resolution
Adviser (DRA) has some of the tasks of conflict management and even
avoidance. Nevertheless, his account of the DRA system is a unique contribution
to the ADR discussion at the UMIST conference because it is a technique which
has just been implemented for the first time in Hong Kong; although the US Army
Corps of Engineers has had Dispute Review Boards, which are conceptually
similar, for some time, and Project Arbitration has some analogous features. The
DRA system, selected from a range of traditional and ADR options, is being used
currently in Hong Kong, following the Adviser’s joint appointment in December
1991 by the Hong Kong Government’s Architectural Services Department and
the contractor carrying out refurbishment on the Queen Mary Hospital there.
Outside of the US, where such techniques are better known, there should be
considerable interest in this experiment and its outcome. It may not be an
overstatement to say that the project has the power significantly to advance the
cause of ADR, or presumably, to retard it, if it is not seen as successful. The
details of operation of the system in Wall’s paper repay careful study.
6
Education and attitude change
It is not only the authors of the papers in this section who regard attitudinal
change of the personnel engaged in the construction process as essential if
dispute avoidance, management and resolution are to be improved. There is a
measure of agreement about the need for better approaches and systems of work.
It is significant that Smith
88
, Nicholson
89
and Wall
90
all arrive at the Partnering
philosophy as having the benefit, in the words of Smith, of “a joint commitment
to common goals in a long term relationship with mutual expectations of trust
and co-operation replacing arms length contractual relationships”. Leeds
91
remarks upon the French movement to Concertation, a concept with similar
attributes, and other authors are clearly thinking along comparable lines. But it is
surely the case that no such proposals will in fact be widely adopted or even
accepted while traditional attitudes prevail. Thus it is that the focus for the
medium-to long-term future switches to Education. Mackie
92
, in evangelistic
vein, calls for “a powerful campaign to achieve a change of mind-set”. Miles
93
is
disturbed by “a general lack of awareness of what ADR is and what it seeks to
achieve”. His paper includes reference to practices which seem to demand
education in other directions: “Contracts signed long after the workmen enter the
site”. Capper
94
gave an amusing but instructive anecdotal example of a ‘topping-
out’ ceremony which he had attended where the construction team, seeking
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 13
congratulations for finishing on time and within budget were asked what
contractual system had achieved this result. The reply was that this had not yet
been decided. Davies
95
too complains that there are deficiencies in the
management and contractual skills achieved in training, especially of architects.
The suggested classification of the Education authors as strategists rather than
pragmatists is not intended in any way to belittle their contributions. On the
contrary, very few of the proposals of the pragmatists are likely to be adopted or
used properly without the change in ‘mind-set’ which only Education (which
includes training and continuing professional development) can supply.
All of the Education authors have recommendations for amelioration of
conflictual behaviour through education. There is a degree of consistency
between three of them, which finds echoes amongst some non-Education authors,
notably Turner-Wright about the need for an integrated approach to construction
education. Franks
96
presents the most detailed treatment of how such integration
has been attempted notably at South Bank, and what benefits may be expected,
which he summarises as a reduction of confrontational attitudes and improved
collaboration, especially between professionals. Hancock
97
calls, more generally,
for “an improved balance between the technological and human requirements of
society” and for “A return to a less specialised form of education and a clear
understanding of the difference between education and training”. Bishop
98
,
giving the Quantity Surveyor’s perspective, also deplores the divisive tendency of
construction education which he sees as a major cause of the ‘them and us’
mentality which underlies many conflicts. Franks
99
can be regarded as speaking
for these 3 authors and many others when he calls for “a genuine commitment to
common education” failing which “it is difficult to see an end to the conflict
culture which has bedeviled the construction industry for far too long”.
Finally, Powell
100
and Gale
101
address ethical issues of construction education.
Powell argues for an ethical basis to construction education and insists that “The
discussion of ethical issues must begin at the beginning of a student’s career”.
Gale calls for a widening of the base of female representation within the
construction disciplines. However, these demands are made not only on grounds
of equity but as measures offering a genuine contribution to reduction of
conflictual behaviour. Powell believes that the inculcation of an ethical approach
“will lead to personal growth and development” which are antithetical to
negative attitudes. Gale’s research suggests that a greater concentration of
feminine attributes in the construction process could benefit an industry which
“is conflictual because it has a male culture”. These attributes include (inter alia)
a greater faculty of self-criticism and more democratic, less leader-oriented
conduct of discussions. The importance of the Education papers consists to some
extent in the detailed proposals for reform of content, but chiefly, in the fact that,
in the words of Bishop
102
“the key to a more productive future is in the word
ATTITUDE”.
14 CONSTRUCTION CONFLICT
7
Overview
The background against which the Conference was called and held was of
increased conflict in the construction industry, of dissatisfaction with traditional
conflict resolution methods and of an increased willingness in the industry to
explore alternative solutions.
There was considerable discussion of and attempts to classify, types of
conflict. Its inevitability and functionality were considered. Proposals for
the avoidance of dysfunctional conflict and the management of inevitable or
unavoided conflict were advanced.
One section of the papers included was devoted to review of existing conflict
resolution methods, their deficiencies and proposals for their improvement.
Given that existing conflict resolutions have inherent deficiencies which
cannot be easily repaired by any of the methods, albeit beneficial, in the previous
section, alternative dispute resolution (ADR) methods were discussed.
Discussion centred on demand, to some extent on the range of models and
techniques utilised in different countries, and on experiences of the use of those
models and techniques.
Proposals for improved attempts at dispute avoidance, dispute management
and dispute resolution would all require the inculcation of different, less
conflictual attitudes, as well as some changes of technical substance in education
and training for construction personnel. Proposals for reforms to achieve this
were advanced.
The Conference benefitted from the submission of papers by authors in 10
countries from 4 continents and from most of the disciplines concerned with the
construction process including architects, engineers, quantity surveyors,
contractors, lawyers, project managers and academics. The gender distribution of
the authors supported the view that the construction industry is
disproportionately male.
The interest generated by the Conference may be regarded as conducive to the
formation of a Working Commission, possibly under the auspices of the
International Council for Building Research and Documentation for the co-
ordination of further research in this general area on an international basis.
8
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CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 15
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16 CONSTRUCTION CONFLICT
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CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 17
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76 (op cit)
77 Stipanowich, T.J., and Henderson, D.A. (1992)Mediation and Mini-trial of
Construction Disputes, Proceedings of the UMIST Conference.
78 (op cit)
79 (op cit)
80 (op cit)
81 (op cit)
82 (op cit)
83 (op cit)
84 Siedel, G.J. (1992) The Use of Mini-trials to Resolve Construction Disputes,
Proceedings of the UMIST Conference.
85 (op cit)
86 Hollands, D.E. (1992) FIDIC Study on Amicable Settlement of Construction
Disputes, Proceedings of the UMIST Conference.
87 (op cit)
88 (op cit)
89 (op cit)
90 (op cit)
91 (op cit)
92 (op cit)
93 (op cit)
94 Capper, P. (1990) 3rd Annual Conference of the Centre for Construction Law
and Management, King’s College, London.
95 (op cit)
96 Franks, J. (1992) Construction Conflict Management—The Role of Education
and Training, Proceedings of the UMIST Conference.
97 (op cit)
98 Bishop, D. (1992) Planning for Disputes—Educating Construction
Management, Proceedings of the UMIST Conference.
99 (op cit)
18 CONSTRUCTION CONFLICT
100 Powell, M. (1992) Conflict in the Context of Education in Building Ethics,
Proceedings of the UMIST Conference.
101 Gale, A.W. (1992) The Construction Industry’s Male Culture Must Feminize if
Conflict is to be Reduced: The Role of Education as Gatekeeper to a Male
Construction Industry, Proceedings of the UMIST Conference.
102 (op cit)
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 19
THE CONSTRUCTION INDUSTRY
HIS HONOUR JUDGE JOHN NEWEY QC
Senior Official Referee, London, England
Abstract
This paper is the opening keynote conference address. The structure of
the industry is discussed and the nature of construction conflict and
disputes is outlined.
1
Construction conflict: management and resolution
The Construction Industry is judged by most criteria to be the largest in the
United Kingdom. The Industry also undertakes much work overseas, particularly
in the Middle East and Far East. Many professionally qualified persons are
exclusively or partly concerned with the Industry, including Town Planners,
Architects, Landscape Architects, Civil, Structural, Mechanical and Electrical
Engineers, General Practice, Valuation, Building and Quantity Surveyors,
Geologists, Accountants, Insurance Brokers and Solicitors. There are also
engaged in it Building and Engineering Contractors, House Builders and Jobbing
Builders, together with a host of specialists, who usually work as Sub-
Contractors, in demolition, piling, steel erection, reinforced concrete, cladding,
glazing, roofing, chimney lining, damp proofing, heating and air conditioning,
decoration, shopfitting, bricklaying and other activities. The Industry is
dependent upon suppliers for all the materials which it uses except for the ground
upon which it builds and often upon hirers for cranes, cherry pickers, pumps,
props and other equipment. Local Authorities, Agencies and Government
Departments are concerned with regulating its activities. The Industry’s clients
vary between the developer of a massive office block or a Highway Authority
creating a motorway to a church requiring a new vestry or a poor widow wanting
her house repainted.
Work may be carried out under elaborate ad hoc contracts requiring weeks of
negotiation and careful drafting, or under standard forms such as the Royal
Institute of British Architects’ for professional purposes or one of the main
contracts or sub-contracts prepared by the Joint Contracts Tribunal on which
most sections of the Industry are represented and have rights of veto, or under
simple contracts in writing or reached by correspondence or orally. Sometimes,
of course, work is performed without any contract having been reached, when
the doer may be able to recover payment in quasi contract.
In parallel with contracts requiring work to be done there are often “collateral
contracts” warranting its performance between Designers such as Architects or
Engineers of a new development and the intended first tenants of it and between
Employers and nominated Sub-Contractors.
2
Disputes
Since the Industry is so large, there are so many individuals, companies,
partnerships and Authorities engaged in it, construction work has to be carried
out on open sites in conditions very different from those in a factory, failures by
one or more can affect all engaged in a project and work often takes substantial
periods during which economic conditions can alter, it is inevitable that disputes
arise.
The London Official Referees’ Courts deal with all High Court and some
smaller construction cases arising in London and the South East and with many
High Court cases arising elsewhere in England and Wales. Between about 1973
and 1980 there was about 100% increase in the number of cases brought to the
courts and in most years after that until 1989 there was an increase of about
15%.
In 1990 there was no significant increase over 1989 and in 1991 there was a
decrease. In 1973 there were three full time Official Referees who were
sometimes assisted by other Judges; now there are seven full time Official
Referees who are assisted by nineteen Official Referee Recorders (Queen’s
Counsel in private practice, who sit for not less than four weeks a year) and
regularly by other Judges. I do not know of any statistics for construction cases
which are commenced before part-time Provincial Official Referee or before
Arbitrators, but increases are probably much the same.
One undoubted reason for more construction litigation and arbitration has been
the changes in Common and Statute Law which have made it easier to bring
claims. Another reason has been increased “claims consciousness”. Other
reasons suggested are the use of new and sometimes imperfectly understood
technologies and the disappearance of the old fashioned Site Agent who
exercised real control over everything which went on and was not afraid to given
hints to professionals.
It would be pleasing to think that the recent fall in the volume of cases is due
to better quality work, increased reasonableness, success by Adjudicators or
successful resort to Alternative Dispute Resolution. The last two have probably
played a part, but I think that the main reasons for decrease have been recent
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 21
decisions of the House of Lords restricting claims in tort for economic loss and
sadly the number of companies which have gone into liquidation.
Courts and Arbitrators backed by adequate powers of enforcement are
essential to ensure general compliance with obligations and compensation for
victims.
Nonetheless involvement in litigation or arbitration, especially in cases which
go to trial or hearing, is at best a misfortune and at worst a catastrophe even for
the successful parties. Counsel’s, Solicitor’s and Expert’s fees are substantial.
Directors, Partners or Principals and staff are distracted from their usual work
and have to devote time to instructing solicitors and attending court, perhaps day
after day, which could be better devoted to earning.
Inevitably there is an interval between the commencement of proceedings and
their determination. In the London Official Referees’ Courts fixed dates for
hearings are given on summonses for directions; cases expected to last for under
eleven days which can be taken by Recorders or Visiting Judges are usually fixed
for about nine months ahead and cases expected to last for over ten days which
can only be taken by Official Referees, fifteen to eighteen months ahead. The
position is similar before provincial Official Referees and Arbitrators. Cases
cannot usually be prepared for trial in shorter periods than these, but during them
even quite large companies can experience liquidity problems, while for
examples a house holder and his family may have to live in a defective house for
want of means to carry out remedial work.
3
Preventing and settling disputes
Where disputes are concerned, prevention is much better than cure! Employers
should decide what they want and designers, contractors, sub-contractors and
suppliers should ensure that they understand what is expected of them. Parties
should then enter into proper contracts and not rely on letters of intent or other
nebulous arrangements.
Standard forms of contract are often criticised, but since construction work is
complicated it is inevitable that contracts governing it are also complicated.
Obviously designers should design properly; junior staff should not be left to
carry out major responsibilities without careful supervision; calculations should
be checked and rechecked; and if an untried technology is to be used the
Employer should be warned and his consent to it obtained. Contractors and
others should not undertake work unless they are sure that they can perform it;
they should submit realistic tenders and not hope to make work profitable by
subsequent submission of claims. Agents and foremen appointed to site should
be capable of providing effective leadership. Contractors who consider that part
of a design is unbuildable or unsupervisable should inform the designer at once
and not wait for difficulties to arise. Designers administering contracts and
22 THE CONSTRUCTION INDUSTRY
contractors and others carrying them out should be determined to work together
and to avoid disputes.
If disputes arise, the best time for resolving them is as early as possible. That
is why I think that the use of Adjudicators named in advance as now required by
most JCT contracts is such an admirable idea. If negotiations on site have failed,
a meeting between directors or the like may still be tried; as the late Lord
MacMillan said: “Jaw jaw is better than war war”. Mediation in any of its forms
is probably best invoked early. If a dispute involves the construction of a
contract the parties should apply to an Official Referee by Originating Summons
or under Order 14A or to a legally qualified Arbitrator to give an immediate
decision on it.
If, notwithstanding all efforts to the contrary, a dispute continues and goes to
the Official Referees’ Court, the Official Referee to whom the case is allocated will
be careful not to discuss settlement with the parties, but he will endeavour by
ordering disclosure of documents, exchange of experts’ reports and cross service
of statements of witnesses of fact to ensure that each party knows the details of
the other’s case and is able to form a realistic view as to the prospects of success.
The Official Referee will also order a meeting of experts to endeavour to agree
technical facts and to narrow issues. In the result about 85% of cases settle
between summonses for directions and dates fixed for their trial. Generally
Provincial Referees and Arbitrators proceed in a similar manner with similar
results.
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 23
Part Two
Construction Conflict
Construction conflict seems inevitable. Researchers and practitioners in other
disciplines have developed formalized conflict management systems. Conflict
management is taught in American business schools. These papers discuss a
number of techniques and situations to which conflict management may usefully
be applied.
‘Facing up to conflict in construction’ (Smith) describes the concepts of
functional and dysfunctional conflict and identifies sources of expertise helpful
to professionals in dealing with conflict connected with the procurement of
buildings.
‘Construction conflict—management and resolution’ (Baden Hellard) suggests
reasons for conflict in 3 principal phases of a construction project; establishing
the brief, during design detailing and contract construction, and emphasises the
importance of total quality management.
‘Managing disputes’ (Cree) puts forward ideas of good project management
techniques to handle disputes relating to motivation and the direction by project
managers of specialists to achieve client’s objectives.
‘Successful conflict management’ (Zikmann) highlights the inevitability of
conflict and suggests that the success of a building project is concerned with
managers identifying and responding to various forms of conflict.
‘Construction conflict—the specialist contractors view’ (Davies) traces the
development of the construction process, concentrating on contractual issues and
settlement of disputes from the specialist contractors viewpoint.
‘Contingency management of conflict: analysis of contract interfaces’
(Langford, Kennedy and Sommerville) describes the sources of conflict found in
different procurement methods, and proposes a model of variables concerning
the relationships between main sub-contractors and trade organisations.
‘Avoiding conflict by risk management—the role of the client’s project
manager’ (Lewis, Cheetham and Carter) discusses the role of the clients project
manager in the application of risk management, and outlines a methodology of
risk management with its application being illustrated by two case studies.
‘Resolving conflict in the formulation of building design objectives’ (Green)
details an example of the use of simple multi-attribute rating technique
(SMART) by presenting a case study of a new laboratory illustrating the benefits
of developing a formal decision model during briefing and outline design stages.
‘The relationship between conflict, change and project management strategy’
(Gardiner and Simmons) puts forward a model for modifying project
management strategies, based upon the findings of research interviews conducted
to identify project conflict and change.
‘Karming conflict’ (Fellows) contends that it is crucially important to prevent
conflicts and disputes arising rather than concentrating on dispute resolution, and
suggests that improvements could be made by considering the notions of
peoplism and Karma.
‘Contracts cause conflicts’ (Clegg) argues that contracts cause rather than
eliminate conflict and uses data collected from construction sites to illustrate this
idea.
‘Construction management integration: an analysis of the degree of integration
between construction professionals and project performance’ (Turner-Wright)
analyses the effect of integration on site management teams, and evaluates an
integration model relating to the concept of construction professionals working
in unison.
‘The French approach to handling conflicts and to negotiating: certain notable
features’ (Leeds) looks at the negotiating model of dominating-integrating and
puts forward the concept of concertation to describe the mediation process in
France.
‘Substantive techniques for conflict resolution: aggregate extraction in
southern Ontario’ (Baker and McLellan) uses aggregate mining in Ontario to
illustrate means used to reduce conflict amongst disputing parties, such as
compensation strategies.
‘“Do it yourself homes”—more or less conflict problems’ (Cosma) describes
economic changes in Rumania, particularly relating to state influence, with
regard to contracts between clients and builders and how this has affected the
settlement of disputes.
‘Transition and management of uncertain resolution’ (Lupasteanu and
Antohie) discusses the influence of communist society upon the Romanian
construction industry, which has led to more competition, presents decision
models, and leadership and management theories.
25
FACING UP TO CONFLICT IN
CONSTRUCTION
MARTIN C.G.SMITH
Managing Director, UK and Offshore, High-Point, Birmingham,
England.
Abstract
The paper identifies sources of expertise helpful to technically trained
construction professionals concerned with construction procurement/
contractual arrangements and the conflicts which ensue. The necessity to
understand the perceptions of rights given by law and the reality in practice
is commented on. Mention is made of the Chartered Institute of Arbitrators
for training and qualification.
The relevance of the concepts of functional and dysfunctional conflict
discussed by the sociologists Simmel and Coser is explained.
The challenge offered by the work of the manufacturing statistician/
production engineers Crosby, Deming and Juran in the modern concept of
Partnering, to traditional arms length contractual relationships is described.
The opportunities offered by awareness of the work of Carl Rogers,
most well known of the people-centred psychotherapists, in understanding
relationships including the state of mind of the individual as it affects his
ability to resolve conflicts and the ways by which people can be helped is
introduced.
The services offered by CEDR may reflect that expertise.
The work of John Childs, the sociologist, in “British Management
Thought” is used to warn of the need to accept theories of management or
contractual procedure, even if traditional, with care.
The paper concludes by expressing the sentiment that this conference is
a step in the right direction of practical research inside the context in
question, before conclusions are drawn.
Keywords: Conflict, Functional and Dysfunctional, Psychotherapy,
Partnering, Construction Law, Management Theory, Dispute resolution.
1
Introduction
The theme of this conference is exciting and my company is delighted to have
been one of the sponsors. It has given those of us who are practitioners the
opportunity to enjoy a forum and to introduce concepts established by leaders
in other fields which we have found to be illuminating. We will be further
assisted in the process by many of the contributors here who are specialists in
their field.
My own contribution arises from experience in a number of countries over the
last ten years, as a construction professional and Director of an international
consultancy concerned with construction project counselling and monitoring for
commercial risk and in commercial and technical problem resolution from quite
small sub-contractor issues to large disputes involving adjudication, arbitration
and litigation, some of which are on the public record. During this period of
living on a diet of heavy commercial administration, engineering, the
interpretation of contracts and problem resolution, I have searched for expertise
and its source material which has something to offer practitioners like myself.
Our consultancy has a firm preference for problem resolution without the use of
expensive formal procedures and we regard it as a failure when these are
required. In this paper I have tried to highlight some of that source material and
identify questions that continue to concern us.
Longer ago than I care to remember the university engineering department I
attended, stimulated me with an experimental course it had introduced containing
a subject called Industrial Anthropology. At the time, we thought it an incredible
title, if not a concept. Today, I am not so sure. In this conference one could say
our speakers are talking about Construction Anthropology, because what our
speakers may be, or what I hope they will be talking about, is the efficiency of
the construction community in regard to its management and resolution of
conflict. A construction conflict is not in my opinion to be regarded solely as a
one off situation concerning two parties in isolation. Construction conflicts are,
after all, endemic in the industry. The reasons for them flow from the way the
industry functions and the techniques of resolution adopted today, will have a
fundamental, but maybe indirect effect, on how the industry evolves for
tomorrow in the shape and size of firms which remain and the way they relate. It
is proper that, as recognised in the conference, the industry should study the
pattern and implication of its conflicts.
Accurate mutual perception of what actually happens, aided by up to date
expertise which will give beneficial insight, is what we are all looking for to play
our part in helping the construction community evolve.
The concepts I introduce in this paper flow from sociology, psychotherapy,
manufacturing and statistical/production engineering.
An appreciation of the practical experience and development of the principles
of commercial relationships and procedures for enforcement of rights established
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 27
by law in various jurisdictions is fundamental if one is to identify objectives and
the practical difficulties in achieving them. The training and exam syllabus
offered by the Chartered Institute of Arbitrators has been found to be particularly
beneficial in this regard.
Perhaps application of some of the expertise to be presented today will help
the practice of the law further approach an ideal of service to the construction
community.
2
Competition, functional conflict and dysfunctional conflict
Two or more parties have the same goal to beat a record, win a race or obtain a
contract. They are in Competition, not having any direct dealings with each
other (if there is a direct interaction, for example they get in each other’s way,
conflict arises). It is common ground in most societies that competition causes
people to strive and is beneficial.
One view of a contract is that it describes a task objectively which has been
competed for and “won”. It is, therefore, no more than the formal arrangement
for the administration of this task.
However, questions to clarifying the work content, quality and time, are bound
to arise, requiring a dialogue and the familiar constituents of the commercial
interface and the criteria of management teams on each side to manage it,
emerge. In that dialogue I think it important to face the issue that on a particular
matter, conflict (with a small c) exists. One party contends one thing, the other
something else. It requires work by both parties to resolve. This inescapable
consequence of a contract is therefore a functional conflict.
This is an area where sociologists may be able to provide us with useful insight.
Lewis Coser in his book “The Functions of Social Conflict”, published in
1956, commented on George Simmel’s work on conflict. Those authors
recognised that many sociologists assumed conflict was always dysfunctional,
that co-operation led to efficiency and noted “a decreasing concern with the
theory of conflict and a tendency to replace analysis of conflict by the study of
‘tensions’, ‘strains’ and ‘psychological malfunctions’.”
I am informed that these two authors are still in vogue today together with the
benchmark they established. Conflict is for real. When it is an inescapable part of
the contracting system we have chosen, it is functional. It needs recognising and
responding to, not pretence or the assumption either that it need not exist, or that
of itself, it is a bad thing. We have then to separate carefully the dysfunctional
conflict we don’t want and see what can be done.
When any conflict is apparently ended some would contend that this is all that
matters and signifies the resolution of functional conflict (as well as
dysfunctional conflict). Before settlement, one party may not regard himself as
having a problem at all, usually the one with the money!
28 FACING UP TO CONFLICT IN CONSTRUCTION
Conflict (with a capital C), in the pejorative sense, seems to be related to that
context “if two parties are in a ditch having a fight and one is on top of the other,
they are both in the ditch!” i.e. they are both suffering. Some would define this
as a dysfunctional conflict.
I reject those definitions.
It is only by consideration of the construction community as a whole that one
may propose which conflicts are functional and which are dysfunctional,
difficult and controversial as that process might be. It might or it might not be in
the communities’ interest that the little guy runs out of money and stops arguing.
The practical importance of what I am saying, is that in my view, in
addressing this subject, we should be, considering where and how we see the
benefits of procurement arrangements (which are inescapably associated with
conflict) and how these procurement arrangements should be optimised in regard
to the functioning of the construction community as a whole. We should look
wider than the definitions of functional and dysfunctional conflict I suggested. I
consider Functional conflict is essentially a construction community
problem, when it is an inescapable consequence of our trading relationships.
Dysfunctional conflict may have arisen if the actions of the parties have gone
beyond what we may recognise as a functional conflict.
My reasons for introducing this concept are twofold.
Firstly, it is being seriously challenged as to whether a traditional arms length
contractual relationship between two companies, when each is dependent on the
other, is necessarily the most efficient commercial relationship.
When considering the costs of managing the interface for both parties from the
beginning, particularly if the interface is a problem one which is habitually
connected with formal dispute resolution, it may be found that expenditure
outweighs the benefits. If the context requires a close technical interrelationship,
a hard commercial interface may be particularly inappropriate.
The concept of Partnering derived from Japanese/American industrial
experience but also recognisable in the relationships such as between Marks and
Spencer and its suppliers, or the total service the 19th century Architect or
Engineer prided himself he gave his client, has to be seriously considered. There
is a joint commitment to common goals in a long term relationship with mutual
expectations of trust and co-operation replacing arms length contractual
relationships.
Those that argue for “accountability” and the benefits of arms length
contractual relationships will have to make their case carefully. There are
powerful arguments for other ways of organisations working together to create a
project using the Partnering philosophy. Authors such as Deming, Crosby and
Juran, on whom other speakers may expand further, were American
manufacturing statisticians or production engineers interested in product
development in the manufacturing industry. They worked in post war Japan.
They dealt head-on with the issue of functional conflict, by seeking at every
stage to create organisational arrangements between parties which could lead to
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 29
emphasis on shared long term goals and the promotion of trust to achieve these
goals. There is recognition that this cannot be achieved without effort and
commitment. A number of major players in the offshore and process plant
industry see their way to lower construction costs through Partnerships, as
distinct from arms length traditional contractual relationships between operator/
client and contractors.
Secondly, our legal tradition has established a concept of justice which gives
each individual a perception of his rights and obligations. I am sure this
conference will further question whether the existing dispute resolutions systems
can live up to the expectations raised by these perceptions.
Financially strong organisations are commonly in dispute with much weaker
organisations and it is sometimes considered that the financial staying power of a
defending larger organisation prevents a smaller organisation obtaining a result
which would be expected on the merits of the case. The constant delay and
deliberate procrastination increasing the “costs” of the arbitration or litigation
can easily create a situation where the investment in the “costs” may become
sizeable in relation to the sum originally at issue. The smaller company may be
in danger of being taken out of its financial depth in circumstances where it is
already financially stretched. This is trial by ordeal, not my concept of justice.
If against such power play a sense of realism causes the smaller organisation
to settle outwith an objective consideration of what would be the result if the
trial had proceeded, the dispute management procedure will have, in effect,
stacked the odds in favour of the larger organisation, at the expense of the smaller
organisation, so creating a platform which will in due course affect the shape of
the industry.
My point again is that we should not be looking at two parties solving their
problems but how our dispute management procedures affect the culture (ways
of working) of our construction industry.
We may accept that the larger organisation should succeed at the expense of
the smaller, or we may not. Whatever our view, the dispute resolution
management procedure which develops will, in some way, also affect the shape
and composition of the industry.
3
Skills to resolve conflict
In the personal counselling world Carl Rogers was perhaps the best known of the
person-centred psychotherapists writing from the 1940’s till his recent death.
Maslov, a contemporary, is equally well known for his hierarchy of social
needs and is often quoted in management education.
Whilst Maslov saw man’s goal as self actualisation, Rogers saw high self-
esteem as underpinning man’s potential for development. Both saw an
openness to new experience, a flexibility of approach and an ability to see
30 FACING UP TO CONFLICT IN CONSTRUCTION
conflict as a challenge and opportunity rather than as a threat, necessitating the
use of rigid defence mechanisms as essential goals of human development.
To resolve a conflict both would say each party needs:-
1 Knowledge of the issue.
2 A sense of personal adequacy to the job.
3 A respect for the skills of the other party.
They were not writing about groups or organisations but my experience suggests
their conclusions are equally applicable, and it is interesting to see how they
reflect the ideals of our legal tradition.
Perhaps those at the Bar represent these ideals but are they reflected in the
actions of the silent majority involved in construction conflicts who never use
formal dispute procedures?
In my experience, I have seen construction conflict regarded as a threat
leading to the use of rigid defence mechanisms. On more occasions, I have seen
parties arguing without adequate knowledge of the issues and behaviour being
adopted, which will not lead to better mutual understanding.
I have seen parties, who on each side are disturbed by the circumstances they
have found their own organisation in and who are preoccupied with possible
consequences. A recognition that this frame of mind is not the optimum one from
which to find a resolution, may be valuable. They need objective help and
support.
Lastly, I have seen many parties who have low respect for the skills of the
other party. I may even venture to suggest that this seems a particular feature of
the U.K. construction scene. Parties who see each other in a shallow way, as
stereotypes, will not have much mutual understanding. Parties who deny they are
in a functional conflict but maintain they are in a dysfunctional conflict will also
have difficulty e.g. “It’s the other person’s personality that is preventing a
solution, not the quality of the functional arguments submitted on our behalf”.
Much of my work is directed towards assisting companies to resolve problems
without the need to institute any formal procedures. When companies and
individuals are stressed and need to take difficult decisions, what the decision
maker may benefit from is being empowered to make decisions and skilled
expertise to help him is valuable. The concepts established by Carl Rogers and
others like him have proved very helpful even though the actual issues under
discussion may be very technical in nature.
4
Management ideology, fact or fiction?
Many years ago, I heard John Child, the Professor of Management Studies at the
University of Aston in Birmingham, introduce his book “British Management
Thought”, in which he pointed out the lack of fundamental content in much of
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 31
the management teaching and its fashionable nature related to the perceived
problem in society at a given moment in time.
If he were looking at the Construction Industry today, I feel sure he would
identify a similar pattern of belief regarding the efficacy of many traditional, as
well as novel (to the UK), contractual procedures and their associated formal
dispute provisions.
What would he say about traditional JCT Public Forms of Contract? Many
years ago I studied the total construction cost per unit area of houses built by a
speculative house builder operating at the top end of the market. I compared this
with similar costs of houses built in the public sector using appointed
professionals and arms length JCT contracting procedures, the market price of
which was less, but which had cost more. The cost of management across
the commercial interfaces, or as I described earlier, functional conflict created
the difference. I am not suggesting that this example has general applications but
it demonstrates the need for alertness and facts.
What would he say about Management Contracting or Major Design and Build
projects? My experience suggests functional conflict (the inevitable consequence
part) exists without significant change from traditional procedures although it
was considered it would be reduced. Dysfunctional conflict and its financial
consequences, particularly arising from the failure of either or both of the parties
to have adequate knowledge of the underlying rules which should govern their
relationships, appears to be no less than the traditional procedures they have
replaced and some would say more.
What about Litigation and Arbitration? We can all see the work carried out
by the Official Referee’s Court and the role it has taken in progressing
construction litigation in the interest of the whole construction community.
We all have a vision of what the original ideal of arbitration was and the
practical realities of construction arbitrations today.
Because the community assumes arbitration is a consensual arrangement
between two parties, no public policy is established which would lead to
professional intrusion to keep costs down and in the mind of the common man,
make justice affordable for all.
My company is one of those closely identifying with CEDR and I look
forward to hearing speakers from that organisation explain the contribution they
have made in ADR.
I hope this conference encourages research to get at the facts inside the
procurement or contracting procedures we use, to address the questions raised in
this paper. Facts need to be separated from fiction by accurate research.
5
Conclusion
I hope the concepts I have introduced, and even more those that subsequent
speakers will develop, will clarify how professional intrusion can be achieved to
32 FACING UP TO CONFLICT IN CONSTRUCTION
reduce the cost of conflict (where it is an extra cost) to the construction
community, using contributions from sociology, psychotherapy, production
engineering and law and any other applicable areas of learning.
Most of all I hope this conference assists in establishing that conflict
resolution is not a matter to be left to the parties alone but something that affects
our whole construction community and therefore needs similar factual study and
a public determination to make improvements for the benefit of the community.
6
References
Bendell, T. (1991) The Quality Gurus: What can they do for your Company?
Department of Trade and Industry, London. Introductions to Crosby, Deming and
Juran are given and their publications listed.
Child, J. (1969) British Management Thought. George Allen and Urwin Ltd, London.
Coser, L. (1957) The Functions of Social Conflict, Routledge and Kegan Paul Ltd,
London.
Jung, C.C. (1983) Memories Dream Reflections, Flemingo, London
National Economic Development Office (1991) Partnering: Contracting Without
Conflict NEDO, London.
Rogers, C.R. (1961) On Becoming a Person: A therapist’s view of psychotherapy,
Constable and Co Ltd, London.
Rogers, C.R. (1951) Client Centred Therapy, Constable & Co. Ltd., London.
Rollo, (1992) The Art of Conselling, Souvenir Press, London.
Contacts
The Chartered Institute of Arbitrators
24 Angel Gate,
City Road,
London,
EC1V 2RS.
Tel: 071 837 4483
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 33
CONSTRUCTION CONFLICT—
MANAGEMENT AND RESOLUTION
RON BADEN HELLARD
Chief Executive, Polycon Group of Consultants, London, England
Abstract
“Construction has a built-in recipe for conflict but good management is
the preventive medicine of dispute”.
This keynote paper will analyze the fundamental reasons for conflict in
the three principal phases of a construction project
Establishing the Brief and the interface between client requirements
and the possible design alternatives
During Design and Detailing—between technical factors and
specialist engineering disciplines
Contract Construction—between the demands of production and
the requirements of the controlling authorities, both within and
without the contractual nexus.
It also suggests how management practices having regard to human
motivation and teamwork through all the preliminary phases can be
sustained during construction by resolution techniques based on social
engineering rather than legal confrontation. Nothing less than total quality
management of the overall process will be adequate.
Keywords: Overall Construction Process, Project Quality Management
Procedures, Contract Management Adjudication.
1
Introduction
The modern practices of Arbitration grew from two principal sectors of the world
economy—Shipping and Construction. Clearly this results from the unique
features involved in a shipping charterparty which, like a construction project, is
one-off in time, place, activity and people relationship and perhaps also in terms
of legal or bye-law jurisdiction.
Legal precedent was less significant than the technical factors involved. In no
area other than construction does the resolution of conflict have an industry all to
itself. One where teams of professionals and experts are employed by several
parties in major construction projects to make and argue claims for more money
or better performance.
The organisation of the Construction Industry today has a built-in recipe for
conflict. Each group of professionals, contractors and sub-contractors have
developed customs and practices which frequently continue when the building
“team” carries out what is a combined operation for essentially prototype
construction. Frequently the building owner is the only “non-expert” in the team
yet it is he who has to make the key project decisions.
It is this background that led to Construction being one of the leaders in the
development of arbitration as an alternative to the courts in resolving disputes
arising from unique construction contracts.
Disputes arise between men even if they result from problems with materials,
machines, methods and money—the resources of management. The use of
management techniques arising from a study of management principles and
practices are more likely to be conducive to a satisfactory resolution of such
disputes than the practice of the courts—but they should embrace some of the
excellent concepts of arbitration.
2
Establishing the Brief
Let us examine first why conflict is a particular feature in construction.
Every construction project has four frequently conflicting elements which
must be established in “the brief”. These four can be classified by the code word
FACT, which collectively defines the Quality requirements
Function—all the technical and physical requirements: space, servicing,
internal relationship between the parts, access, egress and the like.
Aesthetic—that is, the satisfaction of all the human and subjective
aspects that will be enshrined in the end result. The modern equivalent of
“commodity, firmness and delight”. But today there are always requirements
as to:
Cost—both capital and running costs. Perhaps better expressed as
lifetime cost of the project.
Time—the logistic requirements for commercial completion and
occupation which in some cases, for example a short-term exhibition
project, can be the most critical requirement in the client’s brief.
Sometimes the requirements under each of these headings can be given by the
client but sometimes they must be established from the authority that can
exercise a modifying or even controlling influence over the project. The
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 35
influence of such external authorities is rarely complete or black and white. Even
when the authority, as with town planning, has statutory powers, negotiation can
produce solutions to seemingly impossible conflicts in requirements.
In these situations the client’s project manager or design team leader, can still
bring about a satisfactory solution by negotiation, and the design may be the
better for the challenge presented by these conflicts.
It can be seen that when so many people are involved in providing the criteria
for the brief and so many technologies are involved in satisfying the
requirements in a design solution, even before work begins on site the whole
situation is one where conflict between requirements and resources abound.
It should not be forgotten that within the client organisation too there will
always be conflicts in requirements ranging from open enthusiasm (or
reluctance) to a keen desire to have a particular aspect fulfilled to their complete
satisfaction. A capital building project represents a client’s major investment and
perhaps a situation that will be experienced by the managers or those involved
Figure 1—Management responsibility pyramid—building design and construction
functions.
36 CONSTRUCTION CONFLICT—MANAGEMENT AND RESOLUTION
once only in a lifetime, and each will want to see their own particular interest
given satisfaction and priority.
Often these conflicts are not resolved until the project comes out of the ground
and a physical presence illustrates, sometimes alarmingly, what were, until then,
merely mis-conceptions or perceptions.
If all those involved wish to perform their own tasks to the best of their ability
and establish their own programmes there is the need for a great deal of
negotiation, which in turn demands excellent communication ability from those
responsible for finalising the design brief.
Many of these negotiations will continue over weeks or months and be
interactive as between the client’s stated requirements and the constraints
imposed by the external parties—many in conflict with each other.
3
Detail Design
Yet, at some point the design must be frozen to enable the second stage to
proceed—the detailing of materials with their consequent quality and cost
implications—so that a tender can be obtained for implementing the design by
construction.
But before this, conflicts in design requirements between the different
technical disciplines must have been resolved. Here the conflicts are technical as
designers seek to express their own expertise to the best advantage. In the
physical sphere the Structural Engineer may want columns and beams where the
Services Engineer needs ducts, and the Architect would like to see an
unsupported glass wall anyway!
4
Tendering Procedures & Construction
At some stage the design requirements must be tendered for as a construction
contract.
The degree of finality in the price obtained from the various contractors for the
work required of them will, or should, depend upon the extent of the firmness of
the requirements stated in the invitation to tender. The greater the clarity the less
the contractor’s risk. Therefore the more realistic and competitive should be the
price.
But whatever the contract in terms of time and price, external constraints, if
not the client’s own situation, introduce the possibility of continuing change.
Control by an external authority can result in changes of policy, which in turn
produce a different situation which might be to the building owner’s
disadvantage, or produce a benefit, and so produce further changes for the design
requirements, which in turn can reflect upon the contractual terms and produce
claims.
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 37
All this is perhaps to state the obvious but it shows why building contracts
provide for variations within the contract. In principle, every change creates a
situation where the cost and time criteria are completely open to renegotiation.
The various standard forms of contract have grown in size and number to
prescribe what are procedures for dealing with these situations. There are now 94
different “standard” contract forms covering the customs and practices which
have been developed within the industry. These reflect the commercial
conditions prevailing within the industry more than they do the legal environment
outside the industry. It is, however, this contractual situation which must be dealt
with in these construction conflicts, but which, if successful, will also provide a
big pay-off to all parties in the process.
5
The Client’s Project Quality Plan
The project contract through which the legal relationships, promises and
procedures are defined has often been completely separate from the technical
requirements given in the plans, specifications and component schedules but the
Figure 2 THE ORGANISATION NETWORK FOR A BUILDING PROJECT
38 CONSTRUCTION CONFLICT—MANAGEMENT AND RESOLUTION
project’s quality plan should combine all these documents if it is to overcome the
conflict that continues during construction. Now it is between the requirements
of different trades and sub-contractors who will often want to work in the same
place at the same time or may have other demands on their resources from other
projects at the precise time they are wanted to perform but at a time not expected
when they planned their initial schedule, resulting from earlier changes in
programme outside their control.
The changes may be outside the authority and therefore the control of the main
project manager or contractor, resulting from the intervention of licensing
authorities, public utility undertakings, and building authorities generally, or it
may have resulted from unexpected site conditions when sub-soil produces rock
where none was predicted or soft areas when firm foundations had been
identified. This, together with the vagaries of weather and transport or terrorist
disruption combine to produce an ideal climate for conflict during construction.
6
Motivation & Behaviour
Conflict, however, is not just the result of a situation created by a series of
events. It involves people and human emotions. Motivation is an important but
not the only element in human behaviour.
What motivates men? What motivates designers in drawing offices? What
motivates men on a construction site? This will depend partly upon the
conditions under which they work. There will certainly be different attitudes to
working in exposed conditions in the summer with the temperature at 30°C, to
that in a similar situation in the winter at −10°C.
But the reaction of human beings, according to Maslow
3
, depends
fundamentally on the extent of their ascent up their basic pyramid of human
needs from physiological at the base through safety and comfort, social, and
egotistic to self realisation. The parties and people in a building project can be
expected to be at many different personal levels on any one project, and so
behave differently.
But behaviour is the individual’s total response to all motivating forces—only
one of which is the particular project situation. Maslow’s theory postulates that
animal wants are perpetual, and each drive is related to the state of satisfaction or
dissatisfaction with the other drives.
Motivation is, however, human—rather than animal-centred and is goal—
rather than ‘drive’-orientated. All rational human behaviour is caused: we behave
as we do because we are responding to forces that have the power to prompt—
motivate—us to some manner or form of action. In a sense, therefore, behaviour
per se can be considered to be an end result—a response to basic forces.
However, behaviour is actually only an intermediate step in a chain of events.
Motivating forces lead to some manner or form of behaviour and that behaviour
must be directed towards some end. That is to say, there must be some reason
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 39
why we are responding to the motivating force to satisfy the force motivated as
to behaviour in the first place.
Motivating forces are legion and vary in degree, not only from individual to
individual but also from time to time. But motivation is not synonymous with
behaviour. Motivators are only one determinant of behaviour. Behaviour is
almost always biologically, culturally and situationally determined as well. We
are, in short, the product of our environment.
7
Theory X, Theory Y, and Self-Motivation
4
Douglas McGregor takes this behaviour pattern on into what he postulates as
Theory ‘Y’—that people are self-motivated and will respond to what Drucker
called ‘management by objectives’ in contrast to ‘management by control’
(Theory ‘X’) that people are ‘directed’ to fit the needs of the organisation and
Figure 3 Maslow’s Hierarchyof Human Needs
40 CONSTRUCTION CONFLICT—MANAGEMENT AND RESOLUTION
without this fim direction people would be passive since they are by nature idle,
lacking ambition and resistant to change.
Construction workers, perhaps because of their inherent job satisfaction—the
carpenter who lavishes his skills on creating mouldings on doors, frames and
staircases, the bricklayer with prowess with an elaborate decorative brick bond,
or the paver laying a mosaic floor, all knowing that it will be seen and admired
by the generations that pass by the work—appear to fit Theory ‘Y’ propositions
better, and many think that every architect and most designers are all the time
engaged upon fulfilling their ‘Y’ needs at the top of the hierarchical pyramid!
But, because building construction presents a basic situation where every
project involves many people whose objectives are widely divergent or on a
collision course, the behaviour of the parties may be more the result of these
other factors present in conflict situations.
Taking this analysis further to the likely implications on the several parties to
a dispute, a neutral Adjudication Tribunal is more likely to bring about a solution
when it recognises the management culture of construction and studies the
Fig. 4.A INFLUENCES ON HUMAN BEHAVIOUR IN THE 19TH CENTURY
Fig. 4.B INFLUENCES ON BEHAVIOUR IN THE 20TH CENTURY
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 41
contributory elements that caused the situation. This may have flowed from
materials, machines, methods or money rather than from weighing legal
precedent or the words of the contract defined by lawyers whose interest (apart
from winning their case) is the law. Above all, construction dispute resolution
must take account of the motivation of men.
8
The Sports Model
In highly competitive sports arenas we have an excellent model for maintaining
the passage of the game, which is, after all, what the teams and spectators alike
seek! Here too, conflict certainly exists—in the front row of a rugby scrum,
equally between batsmen and fielders in cricket and baseball, no less in
professional tennis players with volatile dispositions and many thousand of
dollars at stake. All these arenas require and have a referee or umpire available to
give an immediate decision on disputed points, without which the game could
never end—or prematurely in chaos and conflict!
Thus, whilst teamwork through quality management concepts may, and should,
have been developed during the design and planning stages, once work begins on
site and enormous sums of money are at stake some suitable form of
Adjudication will be needed to provide a firm base for and binding influence over
the contractual minefield of potential conflict (and actual dispute).
It may not be long before the referee and umpires in sport are provided with a
technological playback to verify their initial decisions. But in providing
Figure 4.C—INFLUENCES AND ATTITUDES TO ACTION IN SITUATIONS OF
CONSTRUCTION CONFLICT
42 CONSTRUCTION CONFLICT—MANAGEMENT AND RESOLUTION
Adjudication in construction from an instant referee it will certainly be possible,
practicable and sensible, to provide for a Final Award after hearing the
representations of the parties. This final Adjudication should resolve all conflicts
shortly after the completion of the work on site, when the implications of the
earlier and interim adjudication decisions can be seen, if necessary remeasured,
and the relative responsibilities assessed and a Final Award made. This should
preclude the need for legislation at great expense without added value.
9
Preventive Measures
Any attempt to resolve conflict expeditiously, economically and effectively
should start as early as possible in the chain of events causing the situation. It
should not, therefore, ignore the possibilities of prevention rather than cure.
Good management is the preventive medicine of dispute. In my experience of
disputes in construction the seeds of the conflict have always been present in the
documents that form the technical basis for the construction and the legal
framework of the contract. Gaps in the requirements, overlap and conflict
between Drawings, Specification, and Schedules, frequently occur due to
inadequate understanding, co-ordination and checking between the disciplines
and people working in parallel on developing the design.
The current world-wide attention to the concept of Total Quality
Management
2
(as an advancement on Quality Assurance and Quality Control)
offers the possibility of developing genuine teamwork and unity of purpose for
the project if it begins, as it must, at the top of the authority pyramid with the
Client’s Project Quality Management Plan (Fig. 1). It can then follow down the
process chain through Project Managers, Designers and into the Construction
zone. Good, strong leadership, and greater participation than is normal by the
Client in his project can get the project “team” to the construction start line in the
best possible state of morale and technical preparedness.
Unfortunately, the stakes are then so high that the occurrence of difficulties on
site referred to in Section 4. above can, and do, frequently shatter the teamwork
and unity of purpose of the separate participating firms as they each retreat into
their own corner and protect and defend their own individual interests.
10
Contract Management Adjudication
1
What will be needed to minimise this effect on what is essentially self-
preservation is the provision of an instant impartial umpire—or umpiring tribunal
—who by their immediate, if interim, decision on the matter can preserve the
parties’ position and so maintain their purpose toward the overall objective of a
Quality building.
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 43
Without this final bridge the chasm between customer satisfaction and
construction conflict will remain, and into it will fall too many projects which set
out to achieve Quality in all its dimensions.
11.
Conclusions
Team building must take place, quality plans must be developed, planning,
scheduling and documenting of procedures must take place. All have a part to
play and this undoubtably requires leadership, management education and
attitude changing. In the construction industry this must include the Customer
first, last, and at all stages if he is to receive from the industry what he wants—a
quality project. This will need to have regard to all the cultures and contracts
through which Quality will be achieved.
It will also need to maintain through the construction phases the discipline and
procedures of instant umpiring as the final stage of Total Quality Management.
References
1. Baden Hellard, R. (1988). Managing Construction Conflict Chapter 8. Longman
Scientific & Technical.
2. ISO Definition (1989) Total Quality Management—below.
3. Maslow, A.H. (1943) Psychosomatic Medicine vol. 5
4. McGregor, Douglas M. (Nov. 1957) The Human Side of Enterprise. AMA
Management Review, Vol 46, No. 11.
Figure 5-CONTRACT MANAGEMENT ADJUDICATION PROCEDURES
44 CONSTRUCTION CONFLICT—MANAGEMENT AND RESOLUTION
Footnote
The Draft Addendum to ISO 8402 “Quality Vocabulary”, at item 3.50 Defines
Total Quality Management as:
“A way of managing an organisation which aims at the continuous
participation and cooperation of all is its members in the improvement of:
- the quality of its products and services
- the quality of its activities
- the quality of its goals
to achieve customers satisfaction, long term profitability of the
organisation and the benefit of its members, in accordance with the
requirements of society.”
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 45
MANAGING DISPUTES
C.A.CREE
Coopers & Lybrand Deloitte, London, England
Abstract
This paper describes the need for, and appropriateness of, using good
project management techniques to handle the dispute process. It identifies
why that need exists and goes on to develop this proposal through analysis
of the environments in which disputes take place.
Keywords: Dispute Management, Strategy
1
Introduction
A project is something that has a beginning and an end. In construction that
beginning and end are readily recognised and can often be described before the
project starts. For example when a client decides that he wants a new warehouse
we know that the project will start with brief collection and preparation of the
financial case. We also know that the project will end as soon as the new
warehouse has been set to work and the client has taken it over.
Is the same true of a dispute? It is; there is a beginning and an end of a
dispute.
Whilst many of us can pin point likely causes of dispute in advance of their
happening we cannot always be precise and one hundred percent certain when a
dispute will start. The same cannot be said of how and when a dispute will be
settled. So our ability to predict the beginning and end of a dispute is much less
certain than for a construction project.
Similarly the processes that we go through during a construction project can
be scoped, options tested and uncertainties managed. In any construction project
we should go through an hierarchical planning exercise. By this, I mean working
from the strategic plan, which is prepared against business and project
objectives, then progressively building up more detailed plans, so, for example,
planning applications are progressed at the right time in relation to building
concept development and site acquisition negotiations etc.
Within any plan there will be points where different options exist for how to
progress. The decision on which option to follow cannot be decided until
a certain physical event has happened. What should be known and detailed
before getting to that decision point is the decision making framework, the risks
associated with each option for progressing the work and the impact on the time,
cost and quality of the remaining work.
All of these points that you will be very familiar with in planning and
managing construction projects apply to a dispute. The fact that a dispute has a
beginning and an end has already been established. The fact that there are
uncertainties in how it will run cannot be queried. As an example consider how
you would decide what the main thrust of the expert witness’ evidence should
be. A decision cannot be made until the basic facts of the dispute are known, so
the key question is when will that occur? Perhaps at initial briefing by the client,
perhaps when witness proofs are taken, perhaps not until after discovery or
perhaps not until the expert witness has done a large amount of detailed work.
At each of these possible decision points the same sort of decision making
framework will need to be considered so that a detailed plan can be developed
and the process managed and controlled. For example, at these decision points it
will be necessary to consider the following types of questions so that plans can
be revised, risks balanced and likely cost commitments calculated: do things look
so bad that your client should withdraw or accept an offer of any settlement now
before the case deteriorates further? should the expert be instructed to look at
specific items relating to the dispute rather than consider all items within his field
of expertise? do the matters which now appear to be most significant mean that a
different expert is needed? and so on.
So a dispute is just like a construction project. It can be planned within a
strategic framework and decision points, decision making frameworks and risks
associated with each option for progressing the dispute can all be identified.
And one final point of similarity between a construction project and a dispute:
you can guarantee that circumstances will change during its currency so
flexibility and forward looking management are vital.
I have made my case for using good project management tools to manage the
process of a dispute. I will now look at how that might be done, by examining
the fundamentals of project management itself. These are:-
(a) understand your client’s objectives;
(b) define the brief;
(c) prepare the project plan;
(d) be forward looking; and
(e) make timely decisions.
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 47
1.1
Understand your client’s objectives
Before embarking on planning the proposed course for a dispute to run it is vital
to understand what your client wants to achieve. These objectives could range
from wanting to see justice done at any cost; to getting an early settlement; to
delay any settlement for as long as possible; or to minimise legal costs and so on.
Obviously each of these objectives would have a different impact on the
actions you might take to plan and progress the dispute. Both the outline plan for
management of the process and the resources could vary for different objectives.
To begin to flesh out the conceptual plans which are available and to
differentiate between plans, it will be necessary to delve more deeply into your
client’s needs and requirements. Only then can a preferred plan can be developed.
1.2
Define the brief
Brief taking and definition is vital to the success of construction projects and the
same is true for disputes. Ultimately a client wants his project to be successful
and to provide value for money. Similarly a happy client knows what is going to
happen, when and at what cost. Greater certainty about timing, cost and success
can be achieved through good brief taking.
Typically it will be important to establish what experience your client has of
disputes. This includes knowing about any inhouse resources that your client
wants to devote to the dispute and knowing about their skills and capability to
contribute to the resolution of the dispute. It also includes an assessment of what
records are available and what the strengths and weaknesses of the arguments on
both sides of the dispute are. Finally it will be essential to understand what
external commercial pressures affect your client and how these might impact on
the management of the dispute.
In seeking answers to these searching questions, the options for handling a
dispute will begin to crystallise. Of course, the normal questions about
contractual requirements, technical and legal issues have to be formulated as
well. Answers to all these questions enable the strategic plan to be mapped out
and preliminary costings, time scales and sensitivity analyses calculated. This is
a vital stage in project management as it provides, after a very short time, the
preliminary scoping for the client in terms that the client will understand and be
able to consider from his own commercial view.
Once the brief is defined your client should be able to take business decisions
within the framework of the brief. For example, he should be in a position to
balance whether the opportunity cost of having his commercial director tied up in
preparing witness statements, researching correspondence and giving evidence is
acceptable when the commercial director could be out negotiating a new
contract.
48 MANAGING DISPUTES
1.3
Prepare the project plan
Once the client brief has been shaped and detailed, the project manager should be
able to put together the project plan. Frequently this task will need to be led by
the project manager with essential input from the legal team, those who have
been involved in the dispute and someone who has a dispassionate view of the
strengths and weaknesses of the potential witnesses. If the legal team involved in
the original contract drafting have practical experience of disputes they could
contribute to the project planning team.
With this team the project plan can be developed through a pooling of
knowledge about the various processes that could be involved, through intimate
knowledge of the dispute itself and of the client’s needs. For each activity (or
potential activity) a series of questions will need to be addressed. For example,
some of the first questions to be asked will focus on what legal routes could be
followed and what commercial routes for settlement exist.
Considering commercial routes: is it possible to apply business pressure to
another part of the other side’s organisation to get a settlement? If the answer is
no then (depending on your client’s objective) this branch of the project will
finish and pursuit of it will not increase the likely payoff from the dispute. If the
answer is yes then this branch of the project plan can be extended by answering
questions about the types of pressure that can be applied, to whom and when etc.
The likelihood of each action producing a successful result can then be assessed
and this can be brought into the overall analysis of the likelihood of getting the
right outcome for your client. As we all know times within the construction
industry are hard and the pressure caused by the potential loss of goodwill
because a dispute is pursued has to be considered. One therefore has to consider:
what will the other side’s response be if a high profile option is followed? is a
successful settlement more likely to be achieved in private through agreement at
Chief Executive level, rather than through arbitration, conciliation or through the
Official Referee’s Court?
Outlined below is a hypothetical example of the structured approach to
planning out a part of a dispute. It clearly illustrates that with careful brief-taking
and analysis of potential actions, a strategic framework can be set up, within
which the dispute can be managed.
The first task in creating the strategic framework is to identify all of the
decisions to be taken. This is a tall order but is it important to remember that a
project manager’s task is not just a “one off planning task but one that requires
repeated attention. The strategic framework is an essential device in ensuring
consistency and focussing thoughts. New decision points will arise because there
are often unexpected twists during the currency of a dispute. The strategic
framework model will help to identify what the sensitive factors are in handling
the dispute. Running the model for different scenarios will help decision making.
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 49
The terminology used by statisticians in this type of modelling is rather
confusing. The exception is the generic title “decision tree” which, for me,
describes clearly the overall objectives of pursuing each possible route
up through the trunk, along the branches and onward to the ends of the twigs.
For example the term “expected monetary value” (EMV) does not necessarily
represent an actual monetary value. It is, just, a comparative measure where the
higher the value the better. Similarly “utility” is a means by which the decision
maker’s preference for monetary return as opposed to avoiding risk is measured.
Through the simple example below I demonstrate the power of using decision
trees to analyse complex problems where a range of outcomes is possible and
preparedness to take risk varies. Contract disputes display all of these features.
The drawing below shows a simple analysis of how to select the best route for
pursuing a dispute.
DECISION TREE
There are two choices, either to go to arbitration or to go to trial. In taking
either of these routes it is possible to get a partial or total win. The probability of
success for each basis is shown by p( ). The EMV is calculated for each route
working from the end point and the estimated payoff back towards the decision
point.
Working through the route marked arbitration the calculation process would be:
arbitration similarly, trial EMV=117.
In terms of EMV the preferred route would be to go to arbitration. However to
take a decision on whether to go to arbitration or trial, it is also important to
consider the range of outcomes because this will help the decision maker assess
the risk (or utility) that he will be assuming. Using variance to reflect riskiness,
where variance=sum of the probabilities times the square of the difference
between the payoff and the EMV, then at arbitration the EMV is slightly higher
50 MANAGING DISPUTES
and the variance is (at trial the
variance is 2,646). So if I wanted to assume as little risk as possible I would go to
arbitration.
From a high level decision taking framework like this it is easy to move
progressively to the next level of detail and so form the whole dispute
management plan. This plan will include time, cost and resources analysis.
The preferred option is the one that matches your client’s objectives best and
the one that should be formalised as the project plan. This is not planning for the
sake of it; disputes are inherently complex and uncertain, to have even a
reasonable chance of success it is vital to understand the complexities and their
impacts so that good negotiating opportunities can be engineered, costs can be
managed and risks reduced.
1.4
Be forward looking
Things always change; there is the legal equivalent of unforeseen ground
conditions, the internal memorandum found at discovery or the failure of the
expert to make his inputs on time or the appointment of an arbitrator, who in
your view is totally unacceptable. In that you can ask these questions without
knowing precise details you can preplan alternative courses of action, and should
do so during preparations of the project plan.
As time progresses some possibilities will not have come to fruition, some
will, so as you move forward you will have more precise details and be able to
review risks and the different likelihoods of being able to reduce them.
By being forward looking and reviewing your plan for a dispute you are able
to reduce foreseeable risks before they crystallise and will be able to refine cost,
resource and time estimates. This then provides you, at all points in time, with
the information needed to manage the dispute process. It also helps you keep
your client well informed about costs and progress. This enhanced client
handling is particularly valued by my clients.
1.5
Make timely decisions
Often decision taking is not the project manager’s prerogative. But a good project
manager should always create the mechanisms so that recommendations on the
best course of action are provided to the decision maker early enough for a
rational decision to be taken (if a rational decision is what is required!).
Recommendations should not be simply technical they should include the
cost, time and risks associated for each alternative course of action. This data
allows the project manager, using structured analysis, to calculate the likely payoff
for the dispute under the new conditions. It also allows the client to be
forewarned of a deterioration in the likelihood of success and prolongation of the
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 51
dispute, or a change in emphasis or a new opportunity to develop a new
negotiated settlement. With project planning which is sufficiently detailed and
analytical it will be extremely difficult for the other side to catch the project
manager, by surprise, and for costs to escalate without early warning. Also it will
be a lot easier to think through the other side’s possible strategies, to carry out
“what if” and scenario analyses so that you can optimise your own responses to
moves made by the other side without panicking or being left short of time.
2
Summary
In summary, I have demonstrated that a dispute is analogous to a construction
project and that the application of good project management will increase
opportunities for success and minimise uncertainty for your client. It provides the
client with the potential to save considerable sums of money both directly,
through reduction of opportunity costs and through ability to predict and preempt
the other side’s strategy.
To maximise the advantages for my clients I work closely with the legal team
because, just as in construction projects, it is true that no individual specialist is
likely to be as effective as a team of necessary specialists, motivated and directed
by a project manager to achieve the client’s objective.
52 MANAGING DISPUTES
SUCCESSFUL CONFLICT
MANAGEMENT
ROBERT V ZIKMANN
Zikmann and Associates, Sydney, Australia
Abstract
The management of conflict is an inescapable part of a Project
Manager’s responsibility. The ability to identify and effectively respond to
conflicts can significantly affect a manager’s overall success in managing a
building project. This paper discusses the importance of effectively
responding to conflict. Typical forms of conflict are identified and the
implications of adopting different responses to these conflicts are evaluated
in terms of their likely impact on relationships and the project. Strategies
for responding effectively to conflict are included in the paper.
Keywords: Conflict Responses, Conflict Implications, Conflict
Resolution Strategies.
1
The importance of understanding conflict
The building industry poses unique challenges to those working in it. Traditional
industry training, economic necessity, modern procurement methods and a heavy
reliance on the subcontract system have produced an industry which is extremely
fragmented.
In this environment, project managers are required to establish and manage
intricate relationship networks for projects of limited life and budget. The very
nature of such projects often provides little incentive for the establishment of
long term working relationships between project participants.
Short term financial concerns often overshadow the potential benefits of
developing and maintaining relationships beyond the limits of the project
duration.
The result is often the development of an aggressive ‘winner takes all’ project
mentality.
Use of threats, financial manipulation and other forms of coercion almost
inevitably become an established part of the project environment.
In these circumstances, several forms of conflict commonly occur.
These include:
- Interest conflicts
- Structural conflicts
- Value conflicts
- Relationship conflicts
- Data conflicts
Unless project managers are alert and have the skills to manage the levels of
conflict effectively, relationships between project participants can deteriorate to
such an extent that the original project goals become impossible to achieve.
2
Responses to conflict
Project managers adopt different styles in responding to conflict. These styles are
usually a combination of individual personality, training and past experience.
Different responses bring with them not only implications for the specific
conflict but also for the project.
Effectively managed conflicts can help identify previously undetected
problems and attitudes. They can also help clarify uncertainties and improve
overall cooperation.
Poorly managed conflicts can conversely create a pool of further unresolved
issues, frustration and resentment. This may result in subsequent and often
escalated conflicts.
2.1
Passive responses
Passive responses occur in the following forms:
- Conflict denial
- Conflict avoidance
- Capitulation
When parties adopt a passive response to conflict, their needs or the needs of
others inevitably go unmet.
Denial of the existence of conflict (when unresolved issue do in fact exist) also
inevitably leads to increased tension. This can result in concealed hostility and the
cultivation of a false sense of security.
In these circumstances, issues of real importance to everyone involved are
seldom adequately addressed, often resulting in frustration and a gradual
withdrawal of cooperation.
54 SUCCESSFUL CONFLICT MANAGEMENT
A desire to maintain the peace or to avoid ‘rocking the boat’ at all costs can
also have undesirable long term consequences.
Failure to adequately confront and deal with problems can result in the
creation of ‘no go’ areas and encourage shallow commitment to project goals.
Capitulation to the demands and threats of other project participants also often
brings with it an incorrect perception that a conflict has been resolved when in
fact it has only been unwillingly suppressed.
2.2
Active responses
Active responses to conflict can take several forms. These include:
- Domination
- Distributive bargaining
- Compromise
- Integrative bargaining
Active responses are normally either aggressive or creative in nature.
2.2.1
Aggressive responses
Aggressive responses include attempts to dominate others (particularly perceived
weaker parties). This can occur when unreasonable demands are made or ‘one
sided solutions’ are imposed on others.
The undesired consequences of domination can often be the stifling of future
initiative, reduced creativity and the creation of an environment where poor
future decisions are allowed to go unchallenged.
Many managers in the construction industry pride themselves on being ‘hard
nosed’ and capable of ‘driving a hard bargain’. As a result their responses to
conflict are usually characterised by distributive bargaining. This response is
usually accompanied by the use of threats, manipulation, the cultivation of
power bases and the defence of adopted positions.
An obsession with ‘winning’ by one side often only results in the opposing
party withdrawing cooperation and setting about defending its adopted position.
This is hardly the environment in which workable solutions are easily identified.
Other managers in the industry subscribe to the view that compromise is the
best response as it normally ensures that the needs of all parties are at least
‘partially met’.
The disadvantage of always adopting this response is that an environment can
be created in which parties regularly ‘over inflate’ initial demands.
Significant time and resources can be wasted in arriving at solutions which are
at best only partially acceptable to the parties.
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 55
2.2.2
Creative responses
In sharp contrast to the other active responses, creative responses are those that
are usually characterised by integrative bargaining.
In this process both parties are encouraged to cooperate in joint problem
solving. The emphasis is on identifying creative and workable solutions which
can satisfy the needs and dispel the fears of the parties involved.
This response contrasts sharply with the other aggressive responses
where maximum effort is usually directed towards persuading or forcing some of
the parties to modify their adopted positions.
Instead of directing resources and effort towards the defence of positions, the
parties concentrate on developing a wide range of possible solutions (i.e lateral
thinking).
If both parties can be satisfied that their needs can eventually be met, it is far
more likely that they will be prepared to modify their adopted positions.
Even if it eventually becomes clear that the needs of all parties cannot be fully
met, a cooperative climate will have been established. In this environment the
probability of achieving a satisfactory resolution to the conflict will have been
greatly increased.
3
Adopting an appropriate response
The adoption of an appropriate response is crucial if the project manager wishes
to effectively resolve a conflict with the minimum disruption to the relationships
or the project.
Most major conflicts develop from relatively insignificant issues which were
not identified and/or correctly responded to when they first occurred.
For this reason passive responses such as denial, avoidance or premature
capitulation should be avoided and actively discouraged by project managers.
Similarly aggressive responses such as domination and distributive bargaining
should be discouraged wherever they could be detrimental to relationships or the
project.
Informal resolution processes such as negotiation and/or mediation should
preferably be the resolution processes initially adopted. Where possible these
processes should be encouraged as a mechanism for integrative bargaining rather
than a search for compromise solutions.
Providing they are constructively used, significant areas of common
agreement can usually be identified. This can have the effect of defusing much
of the hostility and tension that has accumulated.
If areas of the conflict remain that cannot be resolved through further
negotiation, these can often be settled if the parties will agree to abide by the
findings of a mutually agreed independent expert.
56 SUCCESSFUL CONFLICT MANAGEMENT
There is little point in undertaking protracted negotiations in situations where
large power imbalances exist or some of the parties obviously have no desire or
interest in resolving the conflict.
In such cases formalised processes such as arbitration or even litigation may
eventually be required to settle conflict issues.
It should however be appreciated that settlement of a conflict in this manner is
not usually synonymous with conflict resolution and often results in the total
destruction of any longer term working relationship.
4
Conclusions
The ability to effectively identify and respond to conflict is a crucial requirement
for successful project management.
Ultimate success or failure in achieving project goals can often depend on a
project manager’s ability to identify the causes and to respond appropriately.
5
References
Boulton, R. (1982), People Skills, Simon Shuster, Sydney.
Cornelius, H. (1989), Everyone Can Win, Simon Shuster, Sydney.
De Bono, E. (1982), Conflicts, a better way to resolve them, Harrap, London.
Fisher, R. (1981), Getting to Yes, Business Books, London.
Zikmann, R (1990), Conflict Management in the Commercial Environment,
University of New South Wales Report.
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 57
CONSTRUCTION CONFLICT—THE
SPECIALIST CONTRACTORS VIEW
RONALD S.DAVIES
Federation of Associations of Specialists & Sub-contractors
(FASS), Stevenage, England
Abstract
Umbrella organisations are in a prime position to be able to assess the
issues that face construction professionals, since they see all sides of the
problem at one time or another. Hence this paper attempts to trace the
development of the construction process from the pre 1939/45 period
through the present day and to look to possible future developments,
particularly so far as both contractual issues and the settlement of disputes
is concerned. Whilst looking at the position within the industry created for
Alternate Dispute Resolution, it seeks to suggest how such procedure could
be encompassed within a future framework.
Keywords: Deterioration, Professionalism, Education, Conflict,
Settlement.
1
Introduction
FASS, being an umbrella organisation representing a significant number of
specialists in the construction industry, is in a prime position to comment upon
the current, and future, role of the specialist contractor in the present day
construction process. Our industry has moved from a position where the
architect controlled the whole process, through various developments to the
present day when perhaps the architect is the person least suited to have ultimate
control of the contractual scene.
2
Pre-world war two to the present day
The industry has moved over the years from a position where considerable
mutual respect between professionals, contractors and sub-contractors resulted in
well designed buildings being constructed to a relatively high standard and
without conflict, to a position where the complexities of design, not only of the
structure but of the services within it, has led to many designers being involved,
to specialist contractors taking on all manner of additional responsibilities so far
as design is concerned, whilst planning and programming techniques have
developed considerably to establish control and progress of the works which had
hitherto not been considered necessary. All this has let to a proliferation of
working parties, working groups, committees and sub-committees, all with the
same aim, that of preserving the interests of particular sector groups, be it
professionals, employers, contractors or sub-contractors.
The method of execution of the works has also altered considerably from the
position of the contractor who employed directly almost all of the tradesmen
necessary to complete the works to the present day position where, as is now
generally accepted, something over 90% of the construction process is carried out
by specialists or sub-contractors. Indeed, the contractors site staff are often
confined to merely operatives involved in unloading and generally servicing the
specialist trades.
Recent years have seen changes such as were not even contemplated by our
predecessors, hence the proliferation of contract systems that we have
encountered over recent years. Prime Cost, Design & Build, Management
Contracting and now Construction Management. Each brought their own
contract forms, some structured for contracts with quantities, some without. Of
course, following in the wake of all these sub-contracts were all the sub-contract
documents and yet more complications added in the shape of nomination,
naming, pre-naming, to identify but a few.
But even the foregoing was not enough, for in addition others, who for their
own reason, be it dissatisfaction with the present forms or merely that they
thought they could do better, sought to confuse the issue by the introduction of
their own “pet” forms and so we saw the publication of yet further
documentation in the form of contracts designed and published by the British
Property Federation, The Association of Consultant Architects, The Faculty of
Architects and Surveyors and so the list of available options grew.
The matter was made yet more complex by the actions of contractors in recent
years, for despite the fact that Joint Contracts Tribunal had produced, after much
deliberation and negotiation, forms of sub-contract to cater for particular
instances and that the specialist umbrella organisations, in conjunction with
contractors, had produced standard sub-contract forms, the contractors by and
large decided that these forms were not to their liking and spurred on by the
strength they had gained in the path of the ensuing recession in construction, they
in the main decided to ignore standard forms and publish their own individual
forms, or alternatively produce numerous pages of amendments to those standard
forms which rendered them unrecognisable.
And so the scene was set by the early 80’s for the arrival in strength of the
legal profession. Since the mid 80’s it seems that the industry has been in the
grip of both lawyers and accountants and in many companies the “professional”
contractor has been forced to take a back seat.
CONSTRUCTION CONFLICT MANAGEMENT AND RESOLUTION 59
3
How does conflict arise?
It seems therefore that in the early 80’s the industry was ready to welcome the
lawyers. Everything about