The Behaviour of Dispute Resolution Methods in Malaysian Construction
Industry
H. Y. Chong1 and M. Z. Rosli2
1
Department of Built Environment, Universiti Tunku Abdul Rahman, Kuala Lumpur, Malaysia
2
Department of Structure and Materials, Universiti Teknologi Malaysia, Skudai, Malaysia
(chonghy@utar.edu.my)
Abstract – Every project is bound to have disagreement.
Alternative dispute resolution (ADR) techniques do not
require full legal process and become mainstream option to
traditional dispute resolutions. Yet, the actual practice of
ADR is very low in the construction industry. Therefore, a
comprehensive study is necessary to understand the
behaviour of these dispute resolution methods. The research
described in this paper discusses the philosophies and the
selection factors of the dispute resolution methods. The
factors are based on the attributes of the methods.
Preliminary interview and questionnaire survey were
conducted. The results from the data collected indicated that
the contractors and developers are keen on ADR methods,
however arbitration and litigation are somehow accepted
and agreed by the respondents. It is concluded that selection
on ADR or non-ADR is not a major issue, rather the
increased efficiency and appreciation of the methods is more
demanding towards the desired benefits at the end of the
proceedings.
Keywords – Conflict, dispute, dispute resolution,
construction industry
I. INTRODUCTION
Conflict in project management is inevitable. Usually,
conflict is manageable. It would exist where there is an
incompatibility of interest [1] and the management of
conflicts is to select a conflict resolution mode, i.e.,
confronting, compromising, smoothing, forcing, and
avoiding [2]. On the other hand, dispute is defined as an
assertion of opposing views or claims or a disagreement
as to rights (Merriam-Webster's Dictionary of Law
©1996). The conflicts and dispute are co-related. The
conflict would turn into the dispute when the contracting
parties failed to manage the conflict. At this moment,
dispute resolution would be applied either through
binding or nonbinding approach. There are pros and cons
in every dispute resolution method. Hence, the objectives
of the study described in this paper are to critically review
the philosophy of dispute resolution methods and identify
the factors to be considered when selecting the methods.
The dispute resolution methods are discussed together
based on similar characteristic of the methods that have
been identified from literature review. This study is
different from the previous researches which mostly
978-1-4244-4870-8/09/$26.00 ©2009 IEEE
discussed on a single dispute resolution method, for
instance, negotiation [3], [4], mediation [5], [6],
adjudication [7]-[10], and arbitration [11], [12]. Some of
the researches have discussed about ADR, but it is still
limited to the method individually [13]-[15].
II. STAGES OF DISPUTE RESOLUTION
Disputes may be resolved in a number of ways using
various proceedings. It would not be true to say that all
disputes are resolved at court proceedings or other formal
or informal settings of alternative dispute resolution
methods. The stages of dispute resolution should begin
with a grievance. The grievance may be abandoned where
a person considers it to be trivial and not worth pursuing.
The person may feel unable to pursue the matter or may
not realize that he/she may have legal recourse in respect
of it [16]. This grievance is the least confrontation and
time consuming as the person would just follow or
surrender due to his limited understanding or resources. In
developing countries, the grievance is very obvious and
common, even though the jeopardized person may not
realize it.
After that, the stage is negotiation, which is a very
popular informal method in dispute resolution. This stage
tries to communicate the grievance and negotiate for a
settlement. The negotiation technique is a preferred
choice of the disputants, with most disputes being
resolved through this process [17]. It is the least
expensive, and it can preserve the working relationship of
the parties involved. In negotiation, the parties have
absolute freedom with respect to the form, process and
type of agreement. In order to make it successful, the
negotiation demands cooperative effort from the
disputants [18], [19].
However, negotiation is not always workable and
bringing consensus in the end. It is because projects will
be diverging from what has been anticipated and triggered
to other more formal method of dispute resolution. At this
moment, mediation or conciliation would take place to
reach a settlement after the negotiation [20]. Ironically,
mediator has no power to impose a solution and his/her
function is to help or guide disputants to focus on their
actual objectives and resolve their matter consensually
[21].
Therefore, the next stage is the methods that could
render a legal binding decision, i.e., adjudication,
643
 Proceedings of the 2009 IEEE IEEM
arbitration and litigation. The alternative to arbitration is
to the use of adjudication, if we look into perspective of
the characteristics and benefits [7]-[9]. Adjudication deals
with the payment problem between the contracting parties
in particular [10], [22]. Usually, it is under a contractual
provision in the contract and enforceable by law [23].
Subsequently, the next stage is the use of arbitration.
Here it is clear that the disputants need an arbitrator, an
independent expert to act as the decision maker. The
parties must agree to the appointment and are bound by
the arbitrator’s decision. Arbitration is conducted in
private and confidentially [24]. Yet, over the years, with
the increase in procedural complexity, arbitration is
regarded as a replicate of litigation where the designed
original positive effects were disappeared [17], [26].
Therefore, arbitration is categorized as traditional dispute
resolution method, rather than ADR.
Last but not least, litigation is the following stage of
dispute resolution. Litigation is costly, delaying and risky
[25]. It also brings a number of variables and unable to
satisfy the litigants [12]. On the other hand, the court
proceedings consist of several layers too, which is the
hierarchy of the courts. This is important and one kind of
advantages for the provision of an appeals structure [16].
In conclusion, the dispute should be resolved as early
as possible in the stages of dispute resolution. The
contracting parties’ controversy and adversary would be
increased together with the consumption of cost and time
once higher stage of dispute resolution applied as
illustrated in Fig. 1.
Consumption of Cost and Time
Litigation
Arbitration
Adjudication
Mediation
Negotiation
Grievance
Amount of Controversy and Adversary
Fig. 1. Stages of dispute resolution
III. METHODOLOGY
The scope of research is focused on Malaysian
construction industry. A preliminary interview was
conducted prior the questionnaire survey. Local experts in
construction contract administration and dispute
resolution were interviewed to understand the local
644
scenario and enhance research’s validity and significance.
Basically, the questionnaire surveys were the main
sources of primer data collection. The 5-point likert scales
(1=strongly disagree, 2=disagree, 3=neutral, 4=agree and
5=strongly agree) was designed for the main part of the
questionnaire, i.e., factors to be considered while
choosing a dispute resolution method. Subsequently, the
result was statistically analyzed by using the SPSS
Version 15.0.
IV. RESULTS
A. Preliminarily Interview
A preliminary study was conducted with the local
experts in contract administration and dispute resolution.
The research method by interviewing has been adopted to
strengthen and verify the research area. The experts are a
professor, a registered architect, a registered arbitrator and
a licensed and practicing lawyer.
First and foremost, the interview would like to verify
the practice of dispute resolution in the construction
industry. The interviewers agreed that few methods of
dispute resolution are popular in the industry, such as
negotiation, mediation, adjudication, arbitration and
litigation. These methods are rather common except for
adjudication, which is going to be implemented in the
near future.
Besides, another important finding from the interview
was the interviewers have the same opinion that
negotiation is the most practice method as its informal and
non-adversarial nature, while the arbitration also very
familiar to the practitioners as there is arbitration clause in
every local standard form of contract.
The interviewers also commented that prevention
should be applied before adopting any dispute resolution
methods. The prevention is always the best method, yet
human factors also play a big role in the dispute
resolution. In conclusion, the preliminary interview
renders a great insight and direction for the research that
would be carried out.
B. Questionnaire Survey
Survey samples are concentrated on Klang Valley
(Kuala Lumpur and Selangor), Malaysia due to the
strategic location. 281 developers were identified from
Real Estate and Housing Developers’ Association
(REDHA), while 273 Grade 7 ISO certified contractors
were selected out of 2332 Grade 7 contractors registered
with the Construction Industry Development Board
(CIDB). The questionnaires were distributed and returned
with 60 valid questionnaires for analysis. A total of 44
contractors and 14 developers have participated in this
survey. It is acceptable for the larger portion of
contractors as it reflects to the population ratio of the
industry.
 Proceedings of the 2009 IEEE IEEM

Consequently, the respondents’ particulars and Table 3 shows the factor to be considered by the
organizations’ background were studied. Most of the respondents while choosing dispute resolution methods. It
respondents were contract manager and executive, while was sorted according to the mean rank. The highest rank
the rest were quantity surveyor, project manager and was the factor related to negotiation and mediation, i.e.
director. Besides, majority of respondents (74%) have had both parties are fairly treated during negotiation process
more than 5 years working experience and 45 respondents before any official hearing and ruling. The second highest
were degree holder or higher. Moreover, type of project mean was 3.88, which contributed by “expertise judgment
mostly completed by the contractors and developers were in construction of those involve in process (Adj & Arb)”
residential projects (61%), commercial projects (15%), and “the parties are free to look for other dispute
industrial projects (12%), and infrastructure and resolution methods (without legal liability) if they are not
environment utilities (12%). Typically, the projects were satisfied with the result (Neg & Med)”. On the other hand,
private funded, which contributed 66% of the total. the lowest rank (3.30) was improvement of cash flow as
Conflict and dispute were studied in the survey to referring to adjudication.
understand the frequency of cases involved in the industry
as shown in Table 1 and 2. Majority of the respondents TABLE 3
FACTORS OF SELECTING DISPUTE RESOLUTION METHODS
(63%) expressed that average 1-5 cases of conflict in a
project and only 5 respondents (8%) indicated zero case Factors to be considered while choosing a P-
of conflict in a project. Meanwhile, slightly more than Mean SD
dispute resolution method value
fifty percent of the respondents did not involve in any Both parties are fairly treated during
dispute case. However, quite a number of respondents negotiation process before any official hearing 3.98 0.70 0.16
(35%) indicated average 1-5 cases of dispute involved in and ruling (Neg & Med)
the organization annually. The result indicated that Expertise judgment in construction of those
3.88 0.61 0.48
involve in process (Adj & Arb)
conflicts are very common in a project while disputes are The parties are free to look for other dispute
infrequent. Hence it is justified that the disputes only resolution methods (without legal liability) if 3.88 0.69 0.08
occurred when the conflicts failed to be managed. they are not satisfied with the result(Neg & Med)
Flexibility of the process (Neg & Med) 3.83 0.76 0.10
TABLE 1 Speedy of the process (Neg, Med & Adj) 3.83 0.78 0.19
AVERAGE CASES OF CONFLICT IN A PROJECT
Providing a qualified, neutral experts to hear
3.82 0.79 0.21
Number of Cases Frequency Percent complex matter (Med, Adj & Arb)
Ability to appeal if not satisfy with the result
Nil 5 8.3 3.77 0.81 0.25
(Adj, Arb & Lit)
1-5 38 63.4 Helping the parties to understand each other
6-10 8 13.3 3.75 0.73 0.35
demands (Neg & Med)
> 10 9 15.0
TOTAL 60 100.0 Enforceability of the decision (Adj, Arb & Lit) 3.70 0.81 0.09
Preservation of relationship (Neg, Med & Adj) 3.68 0.77 0.22
Economical (Neg, Med & Adj) 3.68 0.85 0.35
TABLE 2 Privacy of the process are protected (Adj & Arb) 3.68 0.87 0.74
AVERAGE CASES OF DISPUTE INVOLVED ANNUALLY
Bindingness of the decision (Adj, Arb & Lit) 3.67 0.75 0..33
Number of Cases Frequency Percent Confidentiality of the process (Adj & Arb) 3.67 0.91 0.59
Nil 32 53.3 Resolving the dispute without involving legal
1-5 21 35.0 3.67 0.75 0.45
profession (Neg, Med & Adj)
6-10 6 10.0
Non complex dispute (Neg &, Med) 3.63 1.04 0.18
> 10 1 1.7
TOTAL 60 100.0 Providing the parties with the relevant
information background in the process for 3.60 0.76 0.18
consensus agreement (Med)
Meeting the budget and schedule of the
3.58 0.77 0.53
The main part of this study is to identify the factors to process (Neg, Med & Adj)
be considered while choosing a dispute resolution Finality of the settlement (Adj & Arb) 3.57 0.83 0.23
method. The factors were discussed based on the dispute Controlling of the process by the parties (Neg & 3.57 1.01 0.24
Med)
resolution methods’ attributes. The methods which have
Long period of the process (Arb & Lit) 3.53 0.77 0.54
been abbreviated in Italic are negotiation (Neg),
Formality of the process (Arb & Lit) 3.53 0.79 0.99
mediation (Med), adjudication (Adj), arbitration (Arb) and
litigation (Lit). Grievance was excluded in this study as it Voluntary process (Neg & Med) 3.53 0.81 0.27
is not a method of dispute resolution. Third party helps to negotiate and narrow
3.48 0.77 0.26
down the issues (Med & Adj)
For data analysis, central limit theorem was applied 3.47 0.93 0.62
Saving in trial expenses (Adj & Arb)
to model the sample mean [27]. According to this
Complex dispute (Adj, Arb &Lit) 3.45 0.79 0.11
theorem, the mean of the sample size is equal to the mean
Improvement of cash flow (Adj) 3.30 0.98 0.55
of the population, where μ x = μ . The samples approach to
normal distribution. As a result, the mean is valid for the
data obtained from this questionnaire survey.

645
 Proceedings of the 2009 IEEE IEEM
P-value of Kruskal-Wallis was included in the
analysis to test the null hypothesis that the means of the
contractors and developers are equal against the
alternative hypothesis that their means are not equal. The
nonparametric Kruskal-Wallis test was selected because
of the result was a rank from the mean score and uneven
sample size of developers and contractors. The test was
compared the mean ranks to find out any statistically
significant differences among the two groups.
The Kruskal-Wallis test indicated that the means of
two groups are equal on the factors as all the variables’ p
(sig) value larger than critical value of significance (sig.)
0.05 [28]. In other words, they have same view of
agreement for the factors according to the statistically
analysis.
Besides, a reliability test was carried out to assess the
consistency of results across the factors. Hence
Cronbach’s Alpha method was applied in this case to
understand whether the data provide a good support for
internal consistency reliability. The Reliability Statistic
below showed the Cronbach’s Alpha value 0.833 from the
correlation among the 27 factors. This value is larger than
0.70, which presents a great support for the consistency of
the results [28].
V. DISCUSSION
All the means were skewed toward agree category,
which more than 3.00. It is not surprise for this
considerably high agreement if it looks into the
perspective that the factors are derived from literature
review and described along with the methods.
Nevertheless, the result is important to tell the behaviour
of dispute resolution method by identifying the
respondents’ view and priority towards the factors to be
considered.
The respondents are keen on ADR methods. Four out
of the top 5 factors were associated with negotiation and
mediation. The factors were discussed about fair
treatment, voluntary, flexibility and speedy of the
proceedings. The respondents ranked it as top priority in
selection of a dispute resolution method.
Although the priority of the factors was identified,
questions would be raised on how the respondents are
going to choose a dispute resolution method as a factor
described along with some methods. The doubt can be
cleared off by following the stages of dispute resolution as
shown in Fig. 1 to select a method which contributes the
least confrontation and consumption of time and cost.
Apart from that, the factors associated with
arbitration and litigation were ranked lower than ADR.
However, the methods are somehow accepted by the
respondents, for instance, the lowest mean of them was
3.45, which it is classified in the agree category. Most
probably, the respondents are understood and appreciated
the attributes of these methods. This finding could
contribute one of the reasons why the actual experience of
646
ADR is very poor.
Lastly, certain limitations need to be considered in
this study. More questionnaire samples may be required to
enhance background of this study. The 60 samples from
the developers and contractors in Klang Valley may
hardly be considered a large percentage of all.
Nonetheless, the data analysis from the survey is
substantial and valid by considering the central limit
theorem.
VI. CONCLUSION
Dispute resolution methods were designed to resolve
a dispute. The approach of grouping methods into a factor
has rendered a wider view on the behaviour of the dispute
resolution methods in the construction industry. The
results of the survey indicated that every method has its
pros and cons. ADR is the preferred option by the
respondents. The continuing search for and use of the
ADR should be emboldened and stirred up in the
construction industry. Besides, increased efficiency of the
ADR or non-ADR proceedings is extremely important.
The methods’ attributes should be appreciated by the
users in order to improve the actual practice and obtain
the perceived benefits at the end of the proceedings.
REFERENCES
[1] P. Fenn, D. Lowe, and C. Speck, “Conflict and dispute in
construction,” Journal of Construction Management and
Economics, vol.15, no. 6, pp. 513-518, 1997.
[2] H. Kerzner, Project Management – A Systems Approach to
Planning, Scheduling, and Controlling. Hoboken, New
Jersey: John Wiley and Sons, 2006, pp. 298-300.
[3] S. O. Cheung, T. W. Yiu, and H. Suen, “Construction
negotiation online,” Journal of Construction Engineering
and Management, Vol. 130, No. 6, pp. 844-852, 2004.
[4] S. O. Cheung, T. W. Y. Yiu, and S. F. Yeung, “A study of
styles and outcomes in construction dispute negotiation,”
Journal of Construction Engineering and Management,
vol. 132, no. 8, pp. 805-814, 2006.
[5] T. W. Yiu, S. O. Cheung, and F. M. Mok, “Logistic
likelihood analysis of mediation outcomes,” Journal of
Construction Engineering and Management, Vol. 132, No.
10, pp. 1026-1036, 2006
[6] S. O. Cheung, and T. W. Yiu, “A study of construction
mediator tactics—Part I: Taxonomies of dispute Sources,
mediator tactics and mediation outcomes,” Journal of
Building and Environment, vol. 42, pp. 752-761, 2007
[7] C. Dancaster, “Construction adjudication in the United
Kingdom: past, present and future,” Journal of
Professional Issues in Engineering Education and Practice,
vol.134, no.2, pp. 204-208, 2008.
[8] T. Hill, and C. Wall, “Adjudication: temporary binding and
tiered dispute resolution in construction and engineering:
Hong Kong experience,” Journal of Professional Issues in
Engineering Education and Practice, vol. 134, no. 3, pp.
306-308, 2008.
 Proceedings of the 2009 IEEE IEEM

[9] C. Owens, “Dispute resolution in the construction industry [27] P. S. Mann, Introductory Statisitcs Using Technology. 5th
in Ireland: A move to adjudication,” Journal of Edition. New York: John Wiley & Sons, 2005.
Professional Issues in Engineering Education and Practice, [28] G. A. Morgan, N. L. Leech, and G. W. Gloeckner, SPSS for
vol. 134, no. 2, pp. 220-223, 2008 introductory Statistics: Use and Interpretation. 3rd Edition.
[10] J. P. Paul Teo, “Adjudication: Singapore Perspective,” New Jersey: Lawrence Erlbaum Associates, 2007.
Journal of Professional Issues in Engineering Education
and Practice, vol. 134, no. 2, pp. 224-230, 2008.
[11] M. J. Armstrong, and W. J. Hurley, “Arbitration using the
closest offer principle of arbitrator behavior,” Mathematical
Social Sciences, vol. 43, pp. 19-26, 2002.
[12] K. M. J. Harmon, “Cost-effective strategies for arbitration,”
Journal of Leadership and Management in Engineering,
October, pp. 148-149, 2004.
[13] T. B. Treacy, “Use of alternative of dispute resolution in
the construction industry,” Journal of Management in
Engineering, vol. 11 no. 1, pp. 58-63, 1995.
[14] F. S. Keith, “Alternative dispute resolution in government,”
Journal of Management in Engineering, September/
October, pp. 25-28, 1997.
[15] R. A. Rubin, and B. V. Quintas, “Alternative dispute
resolution in U.S. public works: Proposed model,” Journal
of Professional Issues in Engineering Education and
Practice, Vol. 129, No. 2, pp. 80-83, 2003.
[16] J. Badman, and L. Grimmett, Legal Framework for the
Built Environment. London: E & FN Spon, 1996, pp.39-40.
[17] S. O. Cheung, C. M. Tam, I. Ndekugri, and F. C. Harris,
“Factors affecting client’s project dispute resolution
satisfaction in Hong Kong,” Journal of Construction
Management and Economics, vol. 18, no. 3, pp. 281-294,
2000.
[18] S. O. Cheung, “Critical factors affecting the use of
alternative dispute resolution processes in construction,”
International Journal of Project Management, vol. 17, no.
3, pp. 189-194, 1999.
[19] C. H. W. Edwin, and S. C. H. Henry, “Disputes and dispute
resolution systems in Sino-Foreign joint venture
construction projects in China,” Journal of Professional
Issues In Engineering Education And Practice, vol. 132,
no. 2, pp. 141-148, 2005.
[20] R. J. Essex, “Means of avoiding and resolving disputes
during construction,” Tunneling and Underground Space
Technology, vol. 11, no. 1, pp. 27-31, 1996.
[21] K. M. J. Harmon, “The effective mediator,” Journal of
Professional Issues in Engineering Education and Practice,
vol. 132, no. 4, pp. 326-333, 2006.
[22] A. A. Noushad Ali Naseem, and C. F. Lim, “A report on
the proposal for a Malaysian Construction Industry
Payment and Adjudication Act,” CONNECTION (CIOB
Malaysia), vol. 2, pp. 3-10, 2008
[23] R. Thomas, R. Construction Contract Claims. 2nd edition.
Hampshire: Palgrave (Macmillan Press Ltd), 2001.
[24] A. L. Evelyn Teo and A. A. Aibinu, “Legal framework for
alternative dispute resolution:Examination of the Singapore
National Legal System for arbitration,” Journal of
Professional Issues in Engineering Education and Practice,
Vol. 133, No. 2, pp. 148-157, 2007.
[25] R. J. Gebken, and G. E. Gibson, “Quantification of costs
for dispute resolution procedures in the construction
industry,” Journal of Professional Issues in Engineering
Education and Practice, vol. 132, no. 3, pp. 264-271, 2006.
[26] S. O. Cheung, H. C. Henry Suen, and T. Lam,
“Fundamentals of alternative dispute resolution processes
in construction,” Journal of Construction Engineering and
Management, Vol. 128, No. 5, pp. 409-417, 2002.

647