CONSTRUCTION METHODS AND PROJECT MANAGEMENT

CE 422

CONFLICT MANAGEMENT
AND DISPUTES RESOLUTION

Prepared by:
Engr. Ernesto F. Capinding, Jr.
TOPICS
OUTLINE CONFLICT MANAGEMENT AND
DISPUTE RESOLUTION
1. Conciliation
2. Mediation
3. Adjudication
4. Arbitration
5. Litigation
CONFLICT MANAGEMENT AND
DISPUTE
CONFLICT
• A serious disagreement or argument.

CLAIMS (in construction industry)

• Issues typically involve in construction projects.

• Example: contractor requesting for time extension or

reimbursement of an additional cost
DISPUTE
• A dispute implies on assertion of a right (claim) by one party and reputation thereof
another
• A claim and counter-claim (without repudiation) does not constitute a dispute.

Conflict management and dispute

CONFLICT MANAGEMENT AND
DISPUTE
Conflicts can be caused by:
• differences in opinions, cultural background or customs, project
objectives, political aspirations or personal attitudes.

• Other factors that tend to cause conflicts:

 poor communications, weak management, competition for available
resources, unclear objectives and arguments over methods and
procedures.

Conflict management and dispute

CONFLICT MANAGEMENT AND
DISPUTE
Thomas and Kilman published a study on conflict management
and suggested five techniques that can be employed for resolving
conflicts. These are:

• Forcing
• Confronting the problem
• Compromising
• Smoothing
• Withdrawing

Conflict management and dispute

TECHNIQUES IN RESOLVING
CONFLICTS

1. Forcing
• involves one party using its authority acquired by virtue of position in the
organization, rank or technical knowledge to force through its point of view.
• Used in a project environment where there is a health and safety issue, or in an
emergency posing a risk of serious physical damage.
• In most of the situations where forcing has been used to solve a conflict, one party
almost certainly feels aggrieved with a consequent adverse effect on morale and
future cooperation.

Conflict management and dispute

TECHNIQUES IN RESOLVING
CONFLICTS
2. Confronting the problem
• a more positive method.
• In this situation, both parties will try to examine what the actual issue is and will
make a concerted effort to resolve it by reasoning and showing mutual respect for
each other’s point of view.
• The most likely situation where this method will succeed is when both the parties
realize that failure to agree will be disastrous for everybody, and when success
will enhance both their positions, especially when it is understood that future
cooperation is vital for the success of the project.
• Often there are useful by-products such as innovative solutions or a better
understanding of the wider picture.

Conflict management and dispute

TECHNIQUES IN RESOLVING
CONFLICTS
3. Compromising
• the most common method to resolve disputes, but generally both parties have to
give up something or part with something, whether it is a point of principle, a
financial claim, pension rights or an improvement in conditions.
• the settlement may only be temporary and the dispute may well flare up again
when one of the parties believes itself to be in a better bargaining position.
• No one really wins, yet both lose something and it may well be the subject of
regret later when the effects of the compromise become apparent.

Conflict management and dispute

TECHNIQUES IN RESOLVING
CONFLICTS
4. Smoothing
• basically one party acceding to the other party’s demands because a more robust
stance would not be in their best interest.

• This could occur where one party has more authority or power (financial,
political or organizational) or where the arguments put forward are more cogent.

• does not mean complete surrender, as it may just not be opportune or politically
wise at this particular time to be more assertive.

Conflict management and dispute

TECHNIQUES IN RESOLVING
CONFLICTS
5. Withdrawing
• in effect means avoiding the issue or ignoring it.

• While this may appear to be a sign of weakness, there may be good reasons for
taking this stance:
 One may be aware that the dispute will blow over when the other party’s anger
has cooled down or a confrontation is likely to inflame the situation even
more.
 One may also feel that the possibility of winning the argument is small, so that
by making what may be considered a small concession, good relations are
maintained.

Conflict management and dispute

SOURCES OF CLAIMS
• The Claim may arise due to the owner or the
contractor. The claim may be on account of any one
of the following causes:

1. There may be defects and loops in the contract

document.

2. There may be delay in release of areas as per contract. Besides, site conditions differ to a
large extend from those described in the contract document.

3. The owner may desire to get the work done at a faster pace than is required by the
contract document.

Conflict management and dispute

SOURCES OF CLAIMS
4. There may be delay in supply of power, water and
other materials from the owner.

5. There may be hold on works due to delay in release

of drawings and other inputs.

6. There may be delay in release of payments to the

contractor.

7. There may be levy of liquated damages (LD) on the contractor. Other recoveries from
bills may also lead to contractor raising the claim.

Conflict management and dispute

SOURCES OF CLAIMS
8. There may be delay on the part of contractor in
completion of works due to inadequate mobilization
of labor, material and plant.

9. There may be loss of profit and investment to the

owner due to delays caused by the contractor.

10. Construction claims can also arise on account of

inclement weather.

Conflict management and dispute

Consider this situation:

In a letter dated June 30, 1998, a contractor makes a claim for (an amount)
additional work in dewatering of foundations, resulting from unforeseen rains
in the month of May and the item not being provided for the contract. The
details of the rainfall and the costs incurred in terms of manpower, equipment,
power consumption, overtime payments made, are annexed to the claim along
with photographs.
In a letter dated July 13, 1998, the owner acknowledge the receipt of the a
foresaid letter from the contractor, and inform them of the owner’s decision to
(a) impose LD for the delay of work, and (2) recover the amount (towards LD).
Does the matter define a dispute?

Conflict management and dispute

 From the given situation, it is not all clear whether it is the delay that is
attributable to the rains or it is the liquidated damages. It should also be
noted that though the contractor has asked for an extra payment, he has not
asked for an extension of time to complete the project. The situation can
be, therefore, considered as basically an example of a claim and
counterclaim, and does not constitute a dispute.

Conflict management and dispute

 1. Incorrect ground data
2. Faulty and ambiguous provisions in contract
CAUSES OF 3. Faulty administration of contract
4. Deviations
DISPUTES 5. Suspension of works
6. Overpayment
7. Contractor being of poor means
8. Default by contractor
9. Unreasonable attitude adopted by contractor
10. Levy of compensation for delay
11. Delays in payment of bills
12. Observation arising out of technical
examination of works

Conflict management and dispute

CAUSES OF
DISPUTES
Incorrect ground data
• Any difference between the ground reality during execution and the conditions
provided in the contract could easily be the reason for disputes.

Use of faulty and ambiguous provisions and/or Language

• Language of the contract in not clear and such that it is open to different
interpretations.
• An ill-defined or not well-defined hierarchy of documents that will be
deemed to prevail in the event of a dispute.

Conflict management and dispute

Example: Some drawings for the material-handling plant showed handrails along
only a central walkway, whereas some showed similar railings along other areas
where covering plates fabricated from MS flats were provided. The confusion
was compounded by a statement in the special condition of the contract, which
stated that the railings were to be provided along the central walkways as per
drawings. The owner insisted that railings were to be provided for all covers,
which was provided by the contractor, who, however, made a case that such
railings were extra and not a part of the original lump-sum contracts. The
arbitrator citing confusion in the drawings, and precedence in documents, insisted
that the provisions of the special condition of the contract (SCC) prevail. In this
case, the natural meaning of the provisions of the SCC was taken as follows- the
document implied the existence of other covered areas where railings need not be
provided, and therefore upheld the contractor’s claim.

Conflict management and dispute

CAUSES OF
DISPUTES
Deviations
• Extra items of work
• Not included in the contract but needed during the project implementation.

Contractor being of poor means

• Scarcity of resources (financial, human resource, and technical)

Conflict management and dispute

DISPUTE
AVOIDANCE
Avoiding a dispute is the best way of handling it.

Some ideas for dispute avoidance:

1. Fair allocation of contract risk
2. Proper and unambiguous drafting of relevant
clauses in the contract
3. Providing for a “neutral” party
4. Use binding Alternative Dispute Resolution
(ADR) mechanism

Conflict management and dispute

MECHANISM OF DISPUTE
RESOLUTION
Dispute Resolution
• Refers to a number of processes that can be used to resolve a disputes
and/or claims.

I. Conciliation
• Informal process in which the parties are assisted by one or more neutral
parties in their efforts towards settlement.
• The main purpose of conciliation is to establish communications between
the parties so that negotiations can be resumed.
• Conciliators should not try to apportion blame, but to focus on the common
interests of the parties and the systemic reasons for the breakdown of
relationships.

Conflict management and dispute

MECHANISM OF DISPUTE
RESOLUTION
II. Mediation
• An informal process of settlement
• The parties in dispute contact and engage a third party either directly or via the
mediation service of one of the established professional institutions.
• Although the parties retain control over the final outcome, which is not enforceable,
the mediator, who is impartial and often experienced in such disputes, has control
over the proceedings and pace of the mediation process.
• The mediator must on no account show him or herself to be judgmental or give
advice or opinions, even if requested to do so.
• His or her main function is to clarify and explore all the common interests and issues
as well as possible options, which may lead to a mutually beneficial and acceptable
settlement.
• Once an agreement has been reached, it must be recorded in writing.

Conflict management and dispute

MECHANISM OF DISPUTE
RESOLUTION
III. Adjudication

• it requires the agreement of both parties, this also means that both parties
have to agree as to who would be the adjudicator.
• process: follow strict adjudication procedures

Conflict management and dispute

MECHANISM OF DISPUTE
RESOLUTION
IV. Arbitration
• Many contracts contain an arbitration clause,
which, in the case of a dispute, requires the
parties to either agree to the appointment of an
arbitrator or ask one of the recognized chartered
institutions to appoint an independent arbitrator.

• It is a quasi-judicial process to the extend that legal protocols is largely

observed.
• In technical dispute, the arbitrator should ideally be an expert in that field.

Conflict management and dispute

MECHANISM OF DISPUTE
RESOLUTION
V. Litigation
• There is an applicable basis for legal action.
• A court procedure which is more formal, and, being in open court, lacks the
privacy of arbitration, involves the employment of solicitors and barristers
who present the case to the judge.
• In addition, there will be expert witnesses recruited by both parties whose
evidence may be given under oath and be subject to cross-examination.

Conflict management and dispute

DISPUTE RESOLUTION IN THE
PHILIPPINES
• RA 9285 of 2004. An act to institutionalize the use of an
alternative dispute resolution system in the Philippines and to
establish the office for alternative dispute resolution and for
other purposes.
• Construction Industry Arbitration Commission
- Under the Department of Trade and Industry

• Philippine Dispute Resolution Center, Inc. (PDRCI)

- panel of local and foreign accredited arbitrators and
mediators.
Conflict management and dispute
…the end

…thank you!