According to Abilene Christian University, 60 to 80% of challenges that businesses face originate from conflicts and strained employee relationships.
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Construction projects are often large, with multiple stakeholders involved in the process, making dealing with disputes all the more difficult. Being a project manager means spending a large portion of your time on the job working through and resolving conflicts of all kinds.
Here’s how we define disputes, how to avoid them, and ways to resolve them.
What are construction disputes?
Construction disputes are disagreements between two or more parties that arise during the construction process. These disputes can be over anything, from the quality of workmanship to the payment schedule. Regardless, they’re often the result of the following:
- Undefined responsibilities in contractual agreements
- Disagreements about proper compensation
- Major changes to a scope of work mid-way through the project
- Change orders requested later in the building process
- Differing site conditions compared to what was initially anticipated
The consequences of unresolved construction disputes
Construction disputes can have a significant impact on all parties involved. They can be time-consuming and costly to resolve, so it’s important to try to avoid them if possible. When they do occur, they can cause delays and additional expenses to be incurred, which can prevent the project from succeeding.
The reason: disputes can cause people to leave the project, resulting in a high turnover rate. The process of replacing a worker can cost a company up to 150% of a worker’s salary. In some cases, workers may not want to return to the project even after the conflict is resolved, so it’s best to avoid wasting resources and improve worker retention by learning how to prevent and resolve disputes as they occur.
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How to prevent construction disputes in the first place
When two or more parties are involved in a construction project, it’s not uncommon for disagreements to arise. So how do you lower the frequency of disputes and keep everyone happy?
Prevention is key, starting from the planning stage. Identify what parts of the project have the highest potential for conflict, and outline what steps should be taken for resolution if it does occur. Considering how many disputes originate from inconsistent deadlines and money, it’s crucial to have a realistic timeline and budget.
Project managers should have a thorough understanding of finalized contracts and communicate them accordingly to contractors, consultants, and owners to ensure that all stakeholders participating in the project understand their exact responsibilities, obligations, and rights.
Contingency plans and risk registers can help with preparation and decision-making.
3 construction dispute resolution methods
Given the complex nature of most construction projects, construction disputes are unfortunately quite common. However, dispute resolution is vital, and there are several methods of dispute resolution. The most appropriate method will depend on the specific situation you’re dealing with. Here are some different ways to resolve disputes on construction sites.
- Follow a pre-established process
Before work begins on the project, it’s important to establish a process for managing construction conflicts. By having a process in place, you’ll have something to guide you through the process of conflict solution mid-project.
The process should include the following steps:
- Identify the problem or issue
- Gather all relevant information
- Analyze the problem
- Develop possible solutions
- Select the best solution
- Implement the solution
- Monitor the results
The moment a problem or issue arises, you can follow the steps above to quickly and efficiently resolve the dispute.
Negotiating disputes is often the most cost-effective way to resolve them. It allows both parties to come to an agreement that suits their needs without going through a lengthy and expensive court process.
It’s important to try to negotiate in good faith and avoid being adversarial. Both parties should be open to compromise and be willing to listen to each other’s needs and concerns. If you’re able to negotiate a resolution, be sure to document the agreement in writing and have all parties involved sign it. This will help prevent any future misunderstandings.
If you’re unable to come to an agreement, you can consider using mediation or arbitration.
- If needed, take it to court
While some disputes can be resolved through informal negotiation, others may require more formal methods of dealing with claims and disputes in construction. Depending on the severity of the disagreement, the parties may choose to mediate, arbitrate, or litigate the dispute.
Mediation is often used in construction disputes, as it allows parties to come to a resolution with the help of an impartial third party. It’s a voluntary process to reach a mutually agreeable resolution, and is the best choice if you’re hoping to maintain a good relationship with the other party.
Arbitration is similar to mediation, but it may be necessary if the parties are unable to reach an agreement through mediation. The arbitrator has the authority to make a binding decision after hearing both sides of the dispute.
Litigation is a formal court process in which a judge or jury renders a decision after hearing evidence from both sides.
Ultimately, the goal of dispute resolution is to reach a fair and efficient resolution that satisfies all parties involved. Which method of dispute resolution is most appropriate will depend on the specific facts and circumstances of each case. However, all of these methods can be effective tools for resolving disputes.
Resources available to help with construction disputes
Construction disputes can be frustrating and time-consuming, and it’s important to choose the right resolution option for your situation. Luckily, there are resources available to help resolve them, such as the Construction Disputes Resolution Service from the American Arbitration Association. This service provides an online platform for mediating and arbitrating disputes.
It’s important to remember that disputes don’t have to be detrimental to your business. With the right resources, they can be resolved quickly and efficiently.
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