George Washington University Lecture Series

Contract Disputes in Project Management and How they are Resolved

time Matters

The George Washington University Lecture Series
Contract Disputes in Project Management and How they are Resolved

Presented by

J. Kimon Yiasemides, Esq., PMP
Senior Consultant, Warner Construction Consultants, Inc.

Dispute Humor

3

Dispute Humor How the Architect Designed It : How Estimating Bid It : What the Owner Wanted : How the Shop Fabricated it : How the Field Installed it: 4 .

Employment Disputes (perhaps for another speaker) SEE: EEOC 5 .

Disputes Arising in the Context of Scheduling IV. Dispute Management through Contracts II.Lecture Overview: I. Forms of Dispute Resolution 6 . Change Clauses and Claims III.

Dispute Management Through Contracts A. Bidding B.I. Contract Formation C. Project Execution 7 .

” – – FAR = Federal Acquisition Regulations (Title 48 of CFR) Other agency specific regulations 8 . Designer Issues Clearly Defined Scope? (number one source of disputes) Un-level playing field among bidders Flexible process.I. Dispute Management Through Contracts A. State or Local Government and permanent rules published in the Federal Register by the executive departments and agencies of the Federal Government. Bidding Issues – Client Issues • • Owner. discretionary Complex Statutory regulations – CFR = Code of Federal Regulations is the “codification of the general – – – Subcontractor Issues • • • Private Commercial Projects Public: Federal.

I. Dispute Management Through Contracts A. Bidding Management Manage by Formalizing the Process – Create even playing field • • • • Same Bonding (limits. type: performance and payment) Process for correction of bid mistakes Reduce Subjectivity – Use of numeric winner (rate contractors on a scale) Scope Clarified – what is ordinary course of business – Pre-bid conference to ensure communication of expectations (remember the tree analogy) 9 .

roles defined Rights and Remedies described Warranties Provided 10 .I. Contract Formation Issues Failure to: – Identify Scope issues • • • Match bid? Adequately described? Timing of performance adequately addressed? – – – Duties of performance. Dispute Management Through Contracts B.

I. Contract Formation Management Standardized Contract forms for Construction – – – – AIA: American Institute of Architects AGC: Associated General Contractors DBIA: Design Build Institute of America Federal forms (ACE. Dispute Management Through Contracts B. GSA. GAO) 11 .

I. Contract Formation Management Reduce Clauses that Cause Disputes Clarify Clauses that Address Disputes 12 . Dispute Management Through Contracts B.

“to the satisfaction of the Owner” OFCI: Owner furnished. Dispute Management Through Contracts B. contractor installed Add subjectivity to performance completion Create non-typical roles 13 . Contract Formation Clauses that cause disputes – – – Add vagueness to scope • • • Ex: Miscellaneous Metals Ex: words like.I.

) Mandatory Arbitration Clauses Choice of Venue or Choice of Law Clauses Termination Claim notice provisions 14 – – Dispute Resolution Clauses • • • • Other Rights/Responsibilities Clauses . Contract Formation Clauses that address disputes – Changes Clauses • • • Owner/Client initiated changes Change Directives Requests for Change Orders (differing site conditions.I. Dispute Management Through Contracts B. etc.

I. Dispute Management Through Contracts C. Project Execution / Performance 15 .

k. Dispute Management Through Contracts C. Constructive Changes Delays to Project Schedule Suspension of the Work • MANAGEMENT TIP = STICK TO THE CONTRACT 16 .a.I. Project Execution Issues Design Alterations Due to Conflicts in the Plans Formal Scope Increases Informal Scope Creep – a.

– Specific Timing and Notice Requirements.II. Change Clauses and Claims Understanding Changes Clauses in the Contract – Commonly missed contract clauses include: • Notice issues • Rights to Delay damages • Claim Perfection. Waivers. Certifications • Definition of Force Majeure – (may vary from expected/normal definition) 17 .

II. Change Clauses and Claims Understanding Changes Clauses in the Contract – Determine what is Compensable (re: delay damages) • Compensable delays include: – Formal Changes or Differing Site Conditions – Suspension of the Work • Non Compensable but Excusable: – “Acts of God” or “Force Majeure” • Non Compensable and non excusable: – Contractor caused or Subcontractor caused 18 .

Changes may be compensable or noncompensable.II. A claim may be resolved through the change management process (typically called a change order). a series of changes. Often these are referred to as a Request for Equitable Adjustment (REA). or other adjustment of the contract terms due to a change. It may also be a change to the conditions by which the work is performed. or a specific action or inaction by a party to the contract that modifies conditions under which the contract was being performed. or may be resolved outside of that process. 19 . or cost of the work from what was contracted. or a failure to meet a contractual obligation. A claim is a request for monetary compensation. Change A change is an event or action by a party modifying the scope. Federal Contracts and others may distinctly define a claim apart from changes handled in the course of the contract performance. time. timing. Change Clauses and Claims Claim v.

and Common-law duties (such as non-interference with the work) 20 .II. Change Clauses and Claims Understanding Legal Rights to a Claim – Typically Need: • Prove Entitlement (contract provision or law) • Causation (answer the “how” question) • Quantify Damages – Understand the contracted method of dispute resolution (may be statutory) • Mediation clauses • Arbitration clauses (enforceability issues) • Mechanics Lien and Miller Act options • Others (timing. Liquidated Damages.) – Special considerations: • No-damages-for delay. etc.

Disputes Arising in the Context of Scheduling Analysis 21 .III.

3.8. In the case of a continuing delay only one Claim is necessary. 4. written notice as provided herein shall be given. and that weather conditions had an adverse effect on the scheduled construction. General Conditions of the Contract for Construction 4. The Contractor’s Claim shall include an estimate of cost and of probable effect of delay on progress of the Work.3. 22 .2 If adverse weather conditions are the basis for a Claim for additional time.8 Claims for Additional Time 4. such Claim shall be documented by data substantiating that weather conditions were abnormal for the period of time and could not have been reasonably anticipated.1 If the Contractor wishes to make Claim for an increase in the Contract Time.III.8.3. Disputes Arising in the Context of Scheduling AIA Document A201.

III. Disputes Arising in the Context of Scheduling Simply put: Delay • Project does not complete as planned or Acceleration • Project completes faster than planned 23 .

with a twist • Causation may come from a failure to extend Project deadline. not just directed acceleration (constructive acceleration) 24 .III. Disputes Arising in the Context of Scheduling Delay areas of dispute – – – Causation Duration Damages resulting Acceleration areas of dispute – Same as above.

III. Disputes Arising in the Context of Scheduling Examples of Types of Analysis/Methodologies: Time Impact Analysis Total Time But For Impacted As-Planned Collapsed As-Built As-Planned As-Built Comparison 25 .

Arbitration C. Mediation v. Litigation 26 . Forms of Dispute Resolution A. Negotiation B.IV.

weaknesses.IV. Negotiation and Settlement Tactics Negotiation lives through all stages of a dispute – – – Begin before formal negotiation sessions Stick to objective goals Find the reasonable range of each issue before beginning the negotiation Determine goals from the onset How much are you able to concede Determine opposition’s positions. and possible goals – – What are the resources of the opposition What is the knowledge base (do they need to be educated as to certain details before they can make an informed decision) 27 . Forms of Dispute Resolution A.

IV. Negotiation and Settlement Tactics Determine how the negotiation is to be facilitated – – – Neutral territory may be needed If 3rd party facilitator necessary then perhaps Mediation is more appropriate Rules of engagement / confidentiality 28 . Forms of Dispute Resolution A.

cost of pursuing. Negotiation and Settlement Tactics Bring the right team to the negotiation – – – Decision makers present or not? Lawyer as your spokesperson has advantages and disadvantages – pre-determine his/her role Timing of when the Expert’s findings become revealed When to settle and when to continue pursuing – – – What are limiting factors such as: time.IV. Forms of Dispute Resolution A. political limitations. and other resource considerations Can the limiting factors be quantified Settlement when negotiation leverage is highest 29 .

IV. Forms of Dispute Resolution B. Mediation and Arbitration Two most broadly used forms of Alternative Dispute Resolution (ADR) forms in Construction claims dispute resolution: Mediation and Arbitration – Both may have state laws covering: • • Confidentiality When is an Arbiter decision or mediation agreement binding – – – Both tend to be less costly than a trial. thus ADR is a good venue 30 . in both monetary and political cost Both tend to take less time than a trial Construction disputes tend to be fact-centered rather than legal or morally centered.

IV. from shuttle diplomacy to facilitative style mediation. if not during the mediation then a more informed settlement prior to trial • Buy-in from the parties more likely than arms length negotiation through lawyers • Parties maintain some control over their destiny 31 . Mediation and Arbitration Mediation – should almost always be used – Advantages • Parties participation can result in a more accepted outcome • More of the underlying issues come out • Varying styles provides flexibility. • Easier to communicate the arguments of the case • Either a more elaborate/in-depth or simplified presentation depending on parties desire • A preview of what is to come at trial • Potential for settlement. Forms of Dispute Resolution B.

• Bad mediator can be a waste of time.IV. Mediation and Arbitration Mediation – Disadvantages • Very few situations when better to not mediate: perhaps if weak on facts. 32 . be sure that his/her style is the appropriate one for the case at hand. and absolutely no chance of reconciliation (rare). Choose mediator carefully. and they have a background in construction or appropriate industry. Forms of Dispute Resolution B. heavy on legal issues.

some States are specific about wording. • • • Typically Arbitration is binding unless otherwise stated Uniform Arbitration Act adopted by some States Requires filings such as a Demand. Mediation and Arbitration Arbitration Tip – Check enforceability of Arbitration clause. timing. Forms of Dispute Resolution B. etc.IV. waiver. and potentially witness statements 33 .

Forms of Dispute Resolution B.IV. Provides potential view of trial outcome Cheaper/faster than litigation May be required by Contract Ease of evidentiary rules Parties may chose industry specific educated arbiter (the right arbiter makes a big difference in outcome) More likely to have an equitable ruling than in litigation Not a public forum. use of confidentiality forms 34 – Binding • • • • • • . Mediation and Arbitration Arbitration Advantages: – Non-binding • • Use like a mini-trial.

IV. Litigation Why go to trial – – – – Parties unable to negotiate settlement One party for political or economic reasons is unable to settle Legal issue that creates an impasse in negotiations Neither party is convinced of the other’s facts 35 . Forms of Dispute Resolution C.

Litigation Advantages – – Provides an enforceable judgment • Caveat: Appeals Can attach property as part of enforcement Disadvantages – Parties loss of control over outcome • • • • • • Both parties may “loose” Blame for a loosing outcome Uninformed judge or jury may not provided equitable solution b) Cost of trial c) Public forum d) Difficulty in presenting fact heavy / evidentiary slim cases 36 .IV. Forms of Dispute Resolution C.

QUESTIONS? George Washington University Lecture Series Contract Disputes in Project Management and How they are Resolved time Matters .

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