Avoiding, Mitigating Contract Disputes with Awareness on the Jobsite

Spotting, addressing red flags that lead to construction disputes

By Roy Cooper

A new global study notes an emerging trend: When superintendents recognize and address certain red flags, they can avoid or mitigate the costs of construction disputes. Best practices in daily management, from monitoring time and record keeping, to hiring and selecting the right workers, to mediating conflict, support the critical role superintendents play in reducing the harm caused by disputes.

The report, published by Arcadis, finds human factors are driving disputes. The patterns from previous years’ reports are similar, indicating that while the industry has developed better contracts, done a better job of risk allocation and has more educated participants, it is often human factors that drive a dispute from infancy to the courtroom.

Since construction disputes are an emotional distraction and cause financial pain for everyone involved, there are several factors—or “red flags”—that construction superintendents can be looking for to help reduce the risk of a dispute from happening, or escalating if one should arise. The following are some red flags to look for and best practices to address them.

Poor project communication. Before digital communications were the norm, many issues were resolved by simply walking over to the jobsite and discussing solutions. Today, if sensitive topics are being addressed via email and text alone, that is a sign that project communication is off track. Without body language and tone, much can be taken out of context. Recognizing subjects with an emotional undertone is a red flag that needs rapid intervention. If the topic is sensitive, consider taking communications offline and having that conversation face-to-face. Follow up with the appropriate written communication recapping the conversation to have it documented, which also helps to prevent emotional (and legal) conflict.

Inadequate record keeping. Standard reporting from staff and onsite field engineers is not enough. Superintendents need to track and present these reports in a way that the owner can understand. Failure to regularly, and accurately, communicate factors like time and budget changes cause problems down the road. These issues can then be resolved as they arise and adjustments can be made. Superintendents should make every effort to understand how the owner is keeping track of progress, time, payments, changes and additional costs. If standard reporting from onsite staff does not align, it’s time to make changes. Reformat reporting so that it matches the owner’s expectations and is appropriate for a potentially problematic project. This may take a little extra work up front, but it will help in the dispute resolution process.

Adversarial relationships. From bad attitudes to rejected feedback, there are several hallmarks of adversarial team members. These people are hard to confront and may be confrontational themselves. They derail projects, blow budgets and generally bring down the team. But, that person just might be the only one with specific institutional or technical knowledge that the project needs. What is a superintendent to do? The best way to spot this red flag is to begin every project with regular, routine meetings. Paying attention to attitudes, the ability to listen or to apply feedback, as well as noting technical, project-based issues is important. From the beginning, set the tone and regularly address progress and issues. This can help reduce the impact of a more confrontational person by making them feel heard. Doing so in a space that is away from others reduces the impact of feeling threatened. These meetings may even help less confident or confrontational people bring light to issues that a superintendent may not see. Providing an expected time and place for feedback can make a superintendent’s input more palatable for everyone. Remember the key here is to make this part of the routine from the beginning—it’s difficult to add this to the agenda once the project has commenced and even more difficult to document retroactively.

Lack of contractual knowledge. In addition to human factors, the study yielded several facts that point to a lack of contractual knowledge as a key driver of disputes. For the third year running, the most common cause for disputes in North America during 2016 was errors and/or omission in the contract documentation. Poorly drafted, incomplete and/or unsubstantiated claims (a newly added cause) ranked in the second position. Failure to properly administer the contract—the top cause globally—moved from second to third position here at home. In North America, where a joint venture was in place, the proportion of disputes caused by a JV-related issue increased from 2015, to nearly a third of all cases. The takeaway here is to keep an eye on contracts that include a joint venture and to generally improve the understanding of all contractual elements before the project begins. A more solid foundation of knowledge regarding what is expected will help a superintendent anticipate contract-related issues, and address them before they cause widespread problems or escalate into a dispute.

Learning to identify these red flags and leverage these solutions can help reduce the occurrence of construction disputes. The industry has changed its behavior over the years and recognizes the importance of early intervention—perhaps the most important takeaway in terms of how the industry can improve or reduce disputes. Many North American-based contracts include some kind of formal administrative process that brings these parties together to try and resolve disputes. These administrative processes are designed to kick in early in a dispute lifecycle, which is usually at the beginning of the construction phase of the project, putting the superintendent in the ideal spot to set a course that avoids key pitfalls.

The construction industry is good at solving technical problems and developing innovative methods. Look around at the cutting-edge projects completed each year in every market sector. After all, there are not very many half-built buildings, highways, airports or power facilities around the world. Formal, early intervention forums and robust contract provisions are the industry’s “technical” answer to avoiding disputes. However, as the survey reveals, there are non-technical factors at the core of every dispute.

The survey experts anticipate the industry will continue to improve preventing disputes from growing through better communication and the use of early resolution techniques.

To learn more about the study and findings, visit arcadis.com.

Roy Cooper worked as a superintendent for many years prior to his role as senior vice president and leader of Arcadis’ Contract Solutions group in North America, where he is responsible for the firm’s claims-related service offerings.