Contract Management

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TYPES OF DISPUTES IN CONSTRUCTION CONTRACTS AND DISPUTE RESOLUTION
RISK MINIMIZATION OF LITIGATION THROUGH PROPER MANAGEMENT

Submitted to: Minal Mankad Submitted by: Kishor Khava

Introduction
DISPUTE: Disputes is a disagreement between individuals A statement by one person that is contradicted by another gives rise to a disagreement, but not necessarily a dispute The disagreement only becomes a dispute when one or other party cannot live with the consequences of the disagreement, and insists on having it resolved Disputes mostly arise either from a genuine difference of opinion or from disingenuous self-interest

Disputes are really disturbing They are emotionally draining, take up time and energy, costly and socially unacceptable Dispute Resolution: The process of resolving disputes between two parties engaged in a contract by a neutral third party, by themselves is known as dispute resolution Or A mechanism to sort out disagreements between two parties

Types of Disputes
Most common disputes arise over:
Plans and specifications/scope of work Shop drawings and submittals Change orders/extra or out-of-scope work Differing site conditions Construction sequencing/project access Subcontractor substitution Construction defects Payment terms

Dispute resolution methods
The various methods used for dispute resolution are:
Mediation Neutral Evaluation Adjudication Arbitration Litigation Expert Determination

A) Mediation
Mediation is a voluntary non-binding process in which a neutral Mediator assists the parties to attempt to achieve a negotiated settlement Mediator will be appointed by both the parties at the time of contracts by the mutual consent of the parties Mediation retains the characteristic of negotiation and gives the parties full control over how their dispute is to be resolved

B) Neutral Evaluation
Neutral Evaluator analysis the submissions of the parties, and the evidence adduced, and gives a non-binding recommendation as to how he thinks the dispute would be resolved if it were referred to adjudication, arbitration or litigation The evidence adduced to the Neutral Evaluator is not as exhaustive as in arbitration or litigation, and the method is used primarily to obtain an independent preliminary assessment of the merits of a case at reasonable cost, to assist the parties in their negotiations of a settlement

The Neutral Evaluator·s evaluation is not binding on the parties at the time it is given. Depending on the parties· agreement, the Neutral Evaluator·s evaluation may become binding on the parties if not rejected by either party within a specified period of time

C) Adjudication
Adjudication is a dispute resolution process in which a neutral adjudicator decides a contractual dispute between the parties within a predetermined time limit, which is usually quite short The time limit for the decision is the distinguishing characteristic of adjudication. Adjudication is similar to arbitration except time limit in adjudication

The adjudicator·s decision is usually binding but not final, which means it is enforceable even if a dissatisfied party subsequently refers the dispute afresh to a more final form of dispute resolution

D) Arbitration
Arbitration is a dispute resolution process that is frequently used as an alternative to litigation in connection with technical disputes where it is considered desirable that the skills of the decision-maker should be more heavily biased towards relevant technical issues, rather than purely legal issues The court system in many national jurisdictions is supportive of arbitration, but there are significant differences between arbitration and litigation. Foremost amongst these is the private and confidential nature of arbitration, as compared with the public nature of litigation

Arbitration has the potential to be quicker and cheaper than litigation, The parties usually have the option to choose their arbitrator or arbitrators, but failing agreement on that, they may still choose the appointing body, the arbitrator gives equal attention to each party·s submissions, and not to rely on any special knowledge of his own, of which the parties may be unaware, without first putting it to the parties and allowing them to comment.

E) Litigation
Litigation, is the State run system of dispute resolution involving judges and courts The judgment of the court is often said to be final and binding If the judgment of the court is not complied with by the loser, the winner may return to court to seek permission to instruct bailiffs to seize property of the loser to the value of the judgment plus associated costs

Because litigation is highly procedural, the parties lose control of it In litigation parties are not given choice of choosing their judge and judges are allocated on rotation basis

f) Expert determination
In the dispute resolution method known as expert determination, an expert is given full authority to decide the dispute according to his own expertise, without necessarily sharing that expertise with the parties and inviting them to comment

Expert·s determination is usually final and binding upon the
parties, and not subject to appeal to the courts unless experts negligence can be proved

Expert determination is arguably the cheapest form of determinative dispute resolution available, but requires considerable faith in the integrity and competence of the expert selected

Risk management as part of contract management
Expect the unexpected during implementation phase † Who does what? † How? † By when? † Example: what happens if increasing costs means concessionaire is enable to operate NADEX under current agreement? Institution·s priorities and relative importance of risks will shift and change † Revisit and reconsider on regular basis † Ensure appropriate risk transfer throughout

To remember«
Each contract is unique
Nature of contract † Construction vs. operations † Length of contract † Flow of funds between public and private sector (availability payments, concession fees, etc«)
†

All require periodic monitoring
What: level of performance † How: quality control † If: consequences † Who: self, institution, independent party
†

Conclusion
There is no particular dispute resolution method which is superior over the other and the choice of the method varies depending on many factors Disputes should be dealt with as early as possible to avoid time and cost overrun Use of force in dispute resolution is ill advised, a blunt, inelegant and tragic way of addressing the diputes

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