3 Common Reasons for Construction Disputes – and 3 Ways to Prevent Them
While thoughtful planning and risk management can help avoid challenges during your project, claims and disputes are unfortunately an inevitable part of the construction process. From breach of contract claims to payment disputes, disagreements can touch all phases of your project.
Worse, disputes have a significant impact on resources, drawing on both valuable time and money. According to a survey conducted by Arcadis, the global average value of construction disputes in 2021 was $52.6 million, lasting an average of 15.4 months.
Thankfully, understanding the most common types of disputes can help your team take steps to anticipate and reduce the frequency of claims – and ensure documentation is in place to efficiently reach a resolution should one arise.
The Most Common Types of Disputes
While the most common types of disputes vary year to year, there are three categories that frequently make the list: contractual issues, changes in scope, and delays.
1. Contractual Issues
With so much vital information to include – often under time constraints – it isn’t hard to see how ambiguity could arise within a contract. But whether it’s a lack of detail, multiple interpretations of a term, missing dates, vague language, errors, or omissions, significant misunderstandings and disputes can spawn within a project contract.
As such, reviewing your contract for any potentially obscure language is paramount. If a term may be considered unclear, easily misinterpreted, or ambiguous, provide a specific definition on the contract itself as an amendment. Have multiple documents circulating for a specific project? Make sure to review all of the related documents as well to ensure the information is consistent and aligned with the project’s terms.
2. Changes in Scope
As projects progress, scope often shifts to accommodate changing needs or plans. If a change order isn’t put in place to capture these adjustments to the original project expectations, a dispute may follow.
Because scope changes can open projects up to potential claims, it is even more important that thorough pre-construction planning be prioritized. By minimizing the number of adjustments needed once a project starts and reducing change orders required, all parties can protect themselves from potential disputes.
While the COVID-19 pandemic put force majeure delays at the forefront of many construction professionals’ minds, there are also two other categories of delay to be on the watch for: delays within the contractor’s control and delays within the owner’s control.
Delays within the contractor’s control may include delays caused by unproductive project management or poor craftsmanship, while delays within the owner’s control include owner-ordered changes in scope, differing site conditions, or delays caused by other parties hired by the owner.
In any of these cases, it is imperative that notice of the delay be provided quickly in writing. Clear communication (as discussed in more detail further below) will help prevent a claim or, if a dispute arises, assist in identifying a quick resolution.
Three Ways to Prevent Disputes
While there are many ways to prevent disputes during your project, clear expectations, consistent communication, and thoughtful planning are all crucial to reducing risk of claims.
1. Set Clear Expectations
Effective planning upfront is vital to all steps of your project, which also helps prevent delays and potential disputes. Investing time into planning ensures scopes of work are clearly defined, which in turn can prevent potential misunderstandings between parties. Likewise, avoid using complicated or misleading jargon and instead rely on concise, unambiguous language and terminology both parties will understand.
A clear contract shouldn’t just define project work, but also terms and liabilities, eliminating as many opportunities for interpretation as possible.
2. Prioritize Documentation & Communication
Whether it’s a discussion on design, a conversation about a potential delay, or a question about the contract, all concerns should be addressed as quickly as possible – and always put in writing. From there, teams can begin working together to identify a solution and, if necessary, draft a change order to redefine responsibilities and expectations.
Maintaining consistent and clear documentation throughout your project will not only help you avoid potential claims but will also act as necessary evidence, should you need to resolve a dispute. More positively, this approach also facilitates more collaboration between project teams and, subsequently, more effective solutions.
3. Include a Claims & Risk Professional on Your Project Team
Utilizing a claims and risk professional will help you anticipate potential challenges and establish a risk management strategy before your project begins. Whether it’s ensuring plans accommodate for newly common obstacles like COVID-19 or developing a response strategy, this expert will help reduce the likelihood of claims and support in their resolution should they occur.
Knowledge is Power
Understanding construction disputes – what might cause one, how to prevent them, and what’s needed to resolve them – shouldn’t be exclusive knowledge. Training your project teams in all matters related to intercepting potential disputes is a valuable investment, particularly as projects grow more complex.
Peritia offers comprehensive training support in construction claims and disputes so you and your team can feel confident and empowered. In addition, Peritia offers Construction Management Services to assist in scope planning and scheduling so you can avoid potential delays, Project Controls Services to mitigate risks and claims, as well as, Claims and Dispute Resolution Services to advise and handle active, on-going claims. If you’d like to learn more, contact us today.