dispute resolution & claims management

8/7/2019 Dispute Resolution & Claims Management

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Dispute ResolutionDispute Resolution

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Claim NegotiationClaim Negotiation

PROFPROF CHITRACHITRA WEDDIKKARAWEDDIKKARA

CHARTERED ARCHITECT/CHARTERED QUANTITY SURVEYOR CHARTERED ARCHITECT/CHARTERED QUANTITY SURVEYOR Professor of Building EconomicsProfessor of Building Economics

BscBsc BE(SL)A Arch (BE(SL)A Arch (AustAust)) BScQSBScQS((AustAust)) MSCMSC BldBld ((AustAust)) PhdPhd Law(Law(AustAust))

FRICSFRICS(UK)(UK) AAIQSAAIQS((AustAust)) FIQSFIQS(SL)(SL)ARAIAARAIA((AustAust))FIAFIA (SL)(SL)IPMIPM(SL)(SL)

University of University of MoratuwaMoratuwa

SriSri--lankalanka



INDUSTRY BACKGROUNDINDUSTRY BACKGROUND

MOST INDUSTRIES ARE RENOWNED TO HAVE DISPUTE ORMOST INDUSTRIES ARE RENOWNED TO HAVE DISPUTE ORCONFLICTSCONFLICTS

THERE ARE MANY OCCASSIONS DURING THE PROCESS OFTHERE ARE MANY OCCASSIONS DURING THE PROCESS OFMANAGEMENT OF ANY PROJECTS WHERE SITUATIONS MAYMANAGEMENT OF ANY PROJECTS WHERE SITUATIONS MAYGENERATES A NUMBER DISPUTES OR CONFLICTS.GENERATES A NUMBER DISPUTES OR CONFLICTS.

THE CLIENT IS TRYING TO ACHIEVE THE BESTTHE CLIENT IS TRYING TO ACHIEVE THE BEST ± ± FINISHED PRODUCTFINISHED PRODUCTPOSSIBLE WITHIN BUDGETS TIME AND QUALITYPOSSIBLE WITHIN BUDGETS TIME AND QUALITY

THE SUPPLIER/SERVICE PROVIDER IS ALSO TRYING TO ACHIEVETHE SUPPLIER/SERVICE PROVIDER IS ALSO TRYING TO ACHIEVETHIS WITH THE POLITICAL ECONOMIC AND MARKET FORCES WHILETHIS WITH THE POLITICAL ECONOMIC AND MARKET FORCES WHILE

TRYING TO MAINTAIN HIS/ HER PROFITABILITYTRYING TO MAINTAIN HIS/ HER PROFITABILITY

IF EITHER PARTY FEELS THAT THE OTHER PARTY IS HINDERINGIF EITHER PARTY FEELS THAT THE OTHER PARTY IS HINDERINGTHEIR GOAL A DISPUTE MAY ARISETHEIR GOAL A DISPUTE MAY ARISE



SOURCES OF CONFLICTSOURCES OF CONFLICT

PROJECTPROJECT UNCERTAINITYUNCERTAINITY The uncertainty arising from preThe uncertainty arising from pre--existing conditions, outsideexisting conditions, outside

forces and the complexity, which cause change beyond theforces and the complexity, which cause change beyond theexpectations of the partiesexpectations of the parties

PROCESS PROBLEMSPROCESS PROBLEMS Problems in the contracting process including contracts,Problems in the contracting process including contracts,

incomplete scope definitions, unrealistic expectations with regardincomplete scope definitions, unrealistic expectations with regardto the quality in terms of specifications cost or completion datesto the quality in terms of specifications cost or completion datesand poor performance in the execution of the workand poor performance in the execution of the work

PEOPLES ISSUESPEOPLES ISSUES Issues and problems arising between people, as a result of poor Issues and problems arising between people, as a result of poor

interpersonal skills, poor communication, lack of responsiveness,interpersonal skills, poor communication, lack of responsiveness,unethical opportunist behavior unethical opportunist behavior



SOURCES OF CONSTRUCTIONSOURCES OF CONSTRUCTION

CONFLICTCONFLICT

DIFFERING PERCETION OF THE ACTORSDIFFERING PERCETION OF THE ACTORS

VALUE JUDGMENTSVALUE JUDGMENTS

BEHAVIOUR BEHAVIOUR

CULTURECULTURE

Value judgmentValue judgment Differing perception of the actors on a particular Differing perception of the actors on a particular

project making a value judgment about a project making a value judgment about a

particular aspect of the project or process particular aspect of the project or process




BehaviorBehavior Organizations or persons initial action which stimulates theOrganizations or persons initial action which stimulates the

conflict :conflict :

As the supplier/service provider/contractor As the supplier/service provider/contractor

As the consultants As the consultants As the Employer As the Employer

As the sub contractor As the sub contractor

The greater the involvement, greater their effect will be on theThe greater the involvement, greater their effect will be on theincidents of conflictincidents of conflict

All conflict events emanate from the key actors in theAll conflict events emanate from the key actors in theorganizationorganization




CultureCulture

Not ethnic culture Not ethnic culture

But Professional CultureBut Professional Culture

Such as superiority of professionalsSuch as superiority of professionals

Attitudes of professionalsAttitudes of professionals

Culture of the supplier/service provider/contractor Culture of the supplier/service provider/contractor Body language of the actorsBody language of the actors

Loop hole engineering by partiesLoop hole engineering by parties



COMMON CAUSES OF CLAIMSCOMMON CAUSES OF CLAIMS

Due to disagreements among, partiesDue to disagreements among, parties

They are:They are:

Root causesRoot causes

Proximate causesProximate causes

Root causesRoot causes

The root causes are the seeds or potential conflictThe root causes are the seeds or potential conflictfrom inception of the project.from inception of the project.

They are:They are:

Unfair or unclear risk allocationUnfair or unclear risk allocation

Unrealistic pricingUnrealistic pricing submitted by a suppliersubmitted by a supplier



COMMON CAUSES OF CLAIMSCOMMON CAUSES OF CLAIMS

Proximate causesProximate causes

These are causes that are immediately apparent inThese are causes that are immediately apparent in

the process of the contractthe process of the contract

They are:They are:

Inadequate design information, inappropriateInadequate design information, inappropriate

contract forms, Incomplete tender informationcontract forms, Incomplete tender information These causes lead to claims developed under These causes lead to claims developed under

recognized contractual provisionsrecognized contractual provisions

E.g. Variations due to unforeseen ground conditionsE.g. Variations due to unforeseen ground conditions



Initial Response for ClaimsInitial Response for Claims

What ever the merits of the claim initial responseWhat ever the merits of the claim initial responsefrom the employer will not to concede.from the employer will not to concede.

Claim entitlement have a duty to comply with their Claim entitlement have a duty to comply with their obligations according to the contractobligations according to the contract

May decide to negotiate a claimMay decide to negotiate a claim

In negotiation it is important to understand theIn negotiation it is important to understand the psychology must be understood psychology must be understood



Psychological aspects of claims negotiationPsychological aspects of claims negotiation

To understand psychology involvedTo understand psychology involved

To be sensitive to a number of unwritten rulesTo be sensitive to a number of unwritten rules

To develop skills in negotiationTo develop skills in negotiation



The human factor The human factor

Authority to conclude a settlementAuthority to conclude a settlement

The subject matter under negotiationThe subject matter under negotiation Your opposite number Your opposite number

Language of negotiationLanguage of negotiation

Strategies at the commencementStrategies at the commencement Final agreementFinal agreement

Psychological AspectsPsychological Aspects



The Human Factor The Human Factor

EmotionsEmotions

Cultures and traditionsCultures and traditions

Gender Gender Knowledge baseKnowledge base



Authority to Conclude aAuthority to Conclude a

SettlementSettlement

Authority vestedAuthority vested

PartialPartial FullFull



Subject Matter Subject Matter

Select team fully conversantSelect team fully conversant

Same team continuouslySame team continuously Clash of personalities / Appropriate changeClash of personalities / Appropriate change



Your Opposite Number Your Opposite Number

Know the man/woman whom you are dealingKnow the man/woman whom you are dealing

(strength and weaknesses)(strength and weaknesses)

His/her authorityHis/her authority AnswerabilityAnswerability

BrinkmanshipBrinkmanship ± ± unexpected cessation of unexpected cessation of

negotiations and serving of a arbitrationnegotiations and serving of a arbitrationnotice to force the hands of the employer intonotice to force the hands of the employer into

making a settlementmaking a settlement



LanguageLanguage

SimplicitySimplicity

Concise and directConcise and direct

LogicalLogical Should be ready to concede at theShould be ready to concede at the

appropriate time if necessaryappropriate time if necessary

Should not concede too many timesShould not concede too many timesunconditionallyunconditionally



StrategiesStrategies

Willingness to listenWillingness to listen

Ability to convinceAbility to convince Aggressive but amicableAggressive but amicable

Using potential items of successUsing potential items of success

Possibility of some concessionsPossibility of some concessions



TechniquesTechniques

Advisable to lead with your negotiation with your Advisable to lead with your negotiation with your

best card best card

ie with items where you are sure of successie with items where you are sure of success

Psychological points are scored early if the first itemPsychological points are scored early if the first item

in the dispute goes in your favor in the dispute goes in your favor

If your best card does not bring you success thenIf your best card does not bring you success then

whole case should be reviewedwhole case should be reviewed



AgreementAgreement

Record agreementsRecord agreements

Be precise and clear Be precise and clear

Signed by both partiesSigned by both parties

Note Note

Event though it is envisaged that there willEvent though it is envisaged that there will

be negotiation and consensus with the contractor be negotiation and consensus with the contractor

in the decisions of the claim there is always thein the decisions of the claim there is always the

possibility that consultant may decide to settle possibility that consultant may decide to settle

the claim unilaterallythe claim unilaterally



CONTRACT PROVISIONS FOR CONTRACT PROVISIONS FOR

DISPUTE RESOLUTIONDISPUTE RESOLUTION

All contracts provide in the ContractAll contracts provide in the Contract

Conditions for Dispute ResolutionConditions for Dispute Resolution

Eg. FIDIC 1999 Clause 20.2Eg. FIDIC 1999 Clause 20.2



Contract ProvisionContract Provision

Traditionally the process of dispute resolution isTraditionally the process of dispute resolution is

ArbitrationArbitration

Due to adversarial nature of the process and the timeDue to adversarial nature of the process and the time

taken for a dispute to be resolved, new trends havetaken for a dispute to be resolved, new trends haveemergedemerged

They are:They are:

Partnering to minimize risk Partnering to minimize risk

ADR process such as Negotiation, Mediation, Conciliation,ADR process such as Negotiation, Mediation, Conciliation,

Mini trialsMini trials

Appointment of a DAB or an adjudicator Appointment of a DAB or an adjudicator



Process of ResolutionProcess of Resolution

Identify the needs to resolve disputes andIdentify the needs to resolve disputes and

choose the right techniquechoose the right technique

The desirable features are:The desirable features are:

FastFast

InexpensiveInexpensive

Fair Fair

Simple and economical processSimple and economical process



Characteristic of a DisputeCharacteristic of a Dispute

Resolution processResolution process

General characteristics should be:General characteristics should be:

Minimum delayMinimum delay

Settlement achieved is final and fair Settlement achieved is final and fair Minimum costsMinimum costs

Minimum animosity and aggravation in the conduct of Minimum animosity and aggravation in the conduct of

proceedings proceedings

The ability to preserve the good will between the partiesThe ability to preserve the good will between the parties ConfidentialityConfidentiality

FlexibilityFlexibility



Methods of dispute resolutionMethods of dispute resolution

Negotiation Negotiation

MediationMediation

ConciliationConciliation Adjudicator Adjudicator

Mini trialsMini trials

DABDAB


LitigationLitigation




Has become a very adversarial processHas become a very adversarial process

Become very expensiveBecome very expensive

Long drawnLong drawn

It is important to review and improve the processIt is important to review and improve the process

since construction is a process where people comesince construction is a process where people come

together for a short period of time and then disbursetogether for a short period of time and then disburse

after the construction and the actors are unable toafter the construction and the actors are unable toaccommodate a long drawn out process of Arbitrationaccommodate a long drawn out process of Arbitration

as it is.as it is.



Arbitration processArbitration process

Rules of arbitration should be adhered toRules of arbitration should be adhered to

The proper appointment of the arbitrators with concurrence of The proper appointment of the arbitrators with concurrence of the two partiesthe two parties

Agreeing of the costs of arbitrationAgreeing of the costs of arbitration

In the duties of arbitrators hearing of evidence and argumentsIn the duties of arbitrators hearing of evidence and argumentsof the parties or their agents in the presence of all parties or of the parties or their agents in the presence of all parties or their agents and determine the dispute in accordance therewiththeir agents and determine the dispute in accordance therewith

In the submission of the claim the parties have adhered to theIn the submission of the claim the parties have adhered to the

procedure procedure Deliver the award in writing to the court as set out inDeliver the award in writing to the court as set out in

the procedurethe procedure



Thank youThank you

dispute resolution & claims management

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