Faculy Marked Assignment No. 8: Mechanical Engineering Department

Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

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COLLEGE OF ENGINEERING CERTIFICATENUMBER
MECHANICAL ENGINEERING DEPARTMENT AJA18-0190
FACULY MARKED ASSIGNMENT NO. 8

CONSTRUCTION DISPUTE RESOLUTION STRATEGIES
Submitted by:
GROUP 2
Antonio, Renato Miguel D.
Aron, Vincezar C.
Burgos, John Adrian I.
Castillo, Zepheus M.
Cleofe, Isiah Jiego B.
Cruz, Vincent Kristoffer D.
Domingo, Ralph Francis L.
Granada, Joshua P.
Nabos, Fritz Gerald A.
Nevalga, Cian Michael R.
Paguagan, John Kenneth P.
BSME 3-1
PUP NDC Compound, Anonas Street, Sta. Mesa, Manila 1016 Direct Line: 716-6273
Website: www.pup.edu.ph | Email: ce@pup.edu.ph
THE COUNTRY’S 1st POLYTECHNICU

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Construction Dispute Resolution Strategies
A. PARTNERING
Partnering is a project approach designed to allow the design and construction process to
be performed within an environment of mutual trust, commitment to shared goals, and open
communication among the client, architect/engineer, construction manager, general contractor (if
applicable), and subcontractors. Partnering establishes a working relationship among all of the
team members based on a mutually agreeable plan of cooperation and teamwork. Parties to the
design and construction process, in agreeing to work under a partnering approach, work to create
an atmosphere in which all parties are working in harmony toward mutual goals to avoid claims
and litigation. Partnering as a concept has attracted a great deal of attention due to the
tremendous amount of litigation which has occurred in recent years in our industry. Adversarial
relationships and resulting claims and litigation have resulted in huge legal costs on many
construction projects. Partnering has shown that this does not need to be the way. Through close
communication and establishing mutually agreeable goals at the beginning of the project,
outstanding results can be achieved with no necessity for outside lawyers. The objective is a “win-
win” attitude between all parties due to the design and construction process. There are already
numerous examples of completed projects which have proven that the partnering process works.
The essential elements of a partnering agreement are as follows:
1. Commitment to partnering by the top management of every organization involved in the project.
2. Trust relationship between all parties through personal relationships and open communication
with mutual sharing and understanding of each party's risks and goals.
3. A partnering charter developed jointly by all parties to the project which identifies specific mutual
goals and objectives of the partnering participants for continuous evaluation and review against
the agreed upon mutual goals.
4. Timely resolution of any disputes at the lowest level possible during the project.
ADVANTAGES
Benefits to the owner
1. Greater control of schedule and cost through close communication and regular evaluation of
project progress.
2. Higher quality through focusing on mutual goals by team members who are not sidetracked
into adversarial relationships.
3. The potential for a totally claim free project which can be achieved through partnering. Lower
administration costs can be achieved by the avoidance of case building and use of outside
counsel.
4. Greater innovation through open communication and trust particularly in the area of value
engineering and constructability reviews.
5. Higher profit potential for all participants resulting in a more efficient project delivery process.
Benefits to the construction manager and general contractor
1. Reduced risk of delays and cost overruns by early and active involvement in issue resolution.
2. Increased productivity by the elimination of adversarial relationships and case building.
Reduced exposure to claims litigation through early low level project resolution of problem issues.
3. Greater profit potential.

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Benefits to architect/engineering consultants

1. Greatly reduced exposure to liability for document deficiencies through early review.
2. Cooperative effort to resolve problems early to reduce exposure to claims and litigation
resulting in reduced administrative costs and increased profit potential.
Benefits to subcontractors and suppliers
1. Improved cash flow due to elimination of, or reduction in, disputes resulting in withheld
payments. Greater involvement in the decision-making process as an active team member in the
project.
2. Reduced exposure to, or elimination of, claims and litigation through early project dispute
resolution. And finally, increased profit potential through a “win-win” attitude.
DISADVANTAGES
1. Partnering often requires high-level management time and dedication to be successful and
therefore a small project may not justify such level of management investment.
2. Whilst partnering often leads to further work from a client, this is not guaranteed. The risk
therefore is that "investment" from all parties in collaborative teams may be lost.
3. If the relationship between the employer/supply chain is too close, there is a risk that the
employer can become increasingly involved in the results of shared decisions and therefore
becomes less able to provide oversight, compared to a traditional 'arms -length' relationship.
4. Partnering principles need to be carefully drafted so as not to be construed as sharing any risk
which has been allocated to the contractor/supply chain or employer elsewhere in the contract.
5. The parties must be careful not to create a partnership as defined by the Partnership Act
1890 (i.e. a relationship which subsists between persons carrying on a business in common with
a view to profit) as this would mean that they would have joint responsibility for each other’s debts,
at least in relation to any project undertaken by the parties. Therefore a 'No Partnership' clause
should be inserted into the agreement – although this may not be enough to prevent a court
finding that a partnership does in fact exist, if all the indications of a partnership are present
through the behavior of the participants.
B. VOLUNTARY ARBITRATION
Arbitration is another alternative to litigation and is a process in which the parties

will agree to refer the dispute to a third party, the arbitrator. Disputes are resolved on the
basis of material facts, documents and relevant principles of law. Arbitration is often used
in the context of international construction disputes, but can equally be used for pure
domestic disputes.
In choosing to arbitrate and/or mediate, make sure the contract clause is clear and
unequivocal. Since there is a constitutional right to access the courts for dispute
resolution, the courts require parties to a contract to show a knowing and clear intention
to give up and forfeit that right and go to arbitration—before a court will force the parties
to arbitrate. Some arbitration tribunals will offer suggested language to use in the contract
to require arbitration as the dispute resolution mechanism. Generally, the clause must
state, in no uncertain terms, that the disputes will be resolved by arbitration. The clause

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must also say which tribunal will administer the arbitration (or mediation) and which rules
will apply.
ADVANTAGES
1. less complicated and relatively quick in court proceedings

2. Disputes are resolved privately
3. more efficient and flexible compared to litigation process
DISADVANTAGES
1. Its fairness is questionable

2. The finality gives-off the right to an appeal
3. It can sometimes be unpredictable
4. It can cost as much or more that litigation
C. MEDIATION
Mediation is often known as "assisted negotiating." The parties choose a neutral

person, the mediator, to assist them in reaching a settlement of the issue.
A mediator is not a negotiator because he or she does not represent either party's
interests. The mediator acts as a facilitator, assisting the parties in determining the
strengths and weaknesses of their arguments and framing and transmitting settlement
offers. The mediator spends the most of his time meeting with each party in private. The
mediator does not have the ability to bind the parties; instead, he or she can only assist
them in reaching an agreement. The parties will achieve a settlement of their
disagreement with the help of the mediator in a successful mediation.
Negotiation and mediation, as you can see, are both non-binding techniques that
will only end the disagreement if all sides agree to a settlement. Compromises,
assurances of performance, and agreements to do business in the future may all be part
of a settlement. The parties retain control of the resolution by using these procedures.
In this situation, hiring an independent and appropriately skilled mediator has numerous
advantages, including:
1. Mediation allows all issues to be canvassed and resolved, reducing the delay,
costs, and uncertainty of litigation, arbitration, and adjudication.
2. mediation allows for flexible outcomes that are unavailable through litigation,
arbitration, and adjudication.
3. mediation process and any settlement terms remain confidential (this being
important to project owners making payments or concessions to contractors, and
contractors to sub-contractors)
4. the parties (who are generally the best informed) control the process and any
outcomes

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D. A binding and enforceable agreement can be used to record agreed-upon

outcomes, including provisions that allow a project to be completed with greater
confidence and with less risk (eg. work and payment schedules)
D.MINI-TRIAL
A mini-trial (also known as an executive tribunal) is a type of alternative conflict
resolution in which each side presents its case to a mini-trial panel, often through legal
counsel. It's possible that a shortened version of the discovery process took place prior
to the mini-trial.
A management executive from each party (with sufficient authority to negotiate a
settlement) and a neutral third party who may act as a mediator or consultant are usually
on the panel. The members of the executive committee are unlikely to have been involved
in the particular argument.
A mini-trial is really not a trial at all. Rather, it is a settlement process in which the
parties present highly summarized versions of their respective cases to a panel of officials
who represent each party (plus a "neutral" official) and who have authority to settle the
dispute. The presentation generally takes place outside of the courtroom, in a private
forum. After the parties have presented their best case, the panel convenes and tries to
settle the matter.
ADVANTAGES
1. Litigation is more expensive and time-consuming than the expedited method.
2. The approach produces minimal business disturbance between the parties, which
is beneficial if the parties want to keep their business connection going.
3. The parties are in charge of resolving the conflict.
4. The hearing allows each party to hear the other's side of the story and weigh in on
their respective advantages and disadvantages.
5. The degree of preparation required for mini-trial will be very useful for subsequent
processes, such as trial, should the mini-trial fail to succeed.
DISADVANTAGES
1. If the parties could have settled the disagreement through direct negotiations or
mediation, the mini-trial work and expense might have been wasted.
2. If the mini-trial is unsuccessful, the time spent there will postpone a resolution that
may be obtained by an adjudicative action such as arbitration or trial.
3. The trial-like nature of the preparation and hearing may continue to polarize the
positions of the parties rather than promote an atmosphere of cooperation from the
outset.
E. BINDING ARBITRATION
Arbitration is a private process where disputing parties agree that one or several
individuals can make a decision about the dispute after receiving evidence and hearing
arguments.
Arbitration is different from mediation because the neutral arbitrator has the
authority to make a decision about the dispute.
The arbitration process is similar to a trial in that the parties make opening
statements and present evidence to the arbitrator. Compared to traditional trials,

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arbitration can usually be completed more quickly and is less formal. For example, often
the parties do not have to follow state or federal rules of evidence and, in some cases,
the arbitrator is not required to apply the governing law.
After the hearing, the arbitrator issues an award. Some awards simply announce
the decision (a "bare bones" award), and others give reasons (a "reasoned" award).
The arbitration process may be either binding or non-binding. When arbitration is

binding, the decision is final, can be enforced by a court, and can only be appealed on
very narrow grounds. When arbitration is non-binding, the arbitrator's award is advisory
and can be final only if accepted by the parties.
ADVANTAGES
1. Efficient and Flexible: Quicker Resolution, Easier to schedule. The dispute will
normally be resolved much sooner. It may take several years to procure a court
trial date, while an arbitration date can usually be obtained within a few months.
Also, trials must be scheduled into court calendars, which are usually backlogged
without hundreds, if not thousands of cases in front of you. On the other hand,
arbitration hearings can conveniently be scheduled based on the availability of
parties and the arbitrator.
2. Less Complicated: Simplified rules of evidence and procedure. Litigation inevitably
leads down a long path of filing papers and motions, and attending court processes
such as motion hearings. The normal rules of evidence used in court may not be
strictly applied in arbitration proceedings, making it much easier to admit evidence.
Discovery, the time-consuming and expensive procedure that involves taking and
answering interrogatories, depositions, and requests to produce documents,
maybe largely reduced in arbitration. Instead, most matters, such as who will be
called as a witness and what documents must be produced, are handled with
simple phone calls with the arbitrator.
3. Privacy: Keep it out of the public eye. Unlike a trial, arbitration leads to a private
resolution, so the information brought up in the dispute and resolution can be kept
confidential. This could be enticing for well-known public figures or clients in
business disputes because all evidence, statements, and arguments will be
completely confidential. On the other hand, in court, even if certain records will not
be released, there is still a risk of some public access to potentially sensitive
business information.
4. Impartiality: Choosing the “judge”. The parties to the dispute usually pick the
arbitrator together, so the arbitrator will be someone that both sides have
confidence will be impartial and unbiased.
5. Usually less expensive. Most of the time, but not always the case, arbitration is a
lot less expensive than litigation. Arbitration is often resolved much more quickly
than court proceedings, so attorney fees are reduced. Also, there are lower costs
in preparing for the arbitration than there are in preparing for a jury trial.
6. Finality: The end of the dispute. For binding arbitration, there are limited
opportunities for appeal. That gives finality to the arbitration that is not often

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available with a trial decision, which may be subject to appeals, new trials and
further appeals.
7. For employers, class action waiver. Recently in 2018, the Supreme Court of the
United States confirmed that valid arbitration agreements can include a class
action waiver. Therefore, many employers became more interested in including a
class action waiver in the employment agreement in order to limit risk exposure.
DISADVANTAGES
1. Questionable Fairness
a. Mandatory arbitration. If arbitration is mandatory by contract, then the

parties do not have the flexibility to choose arbitration upon mutual consent.
In these cases, one party can force the other party to go to arbitration, even
a jury trial maybe more advantageous to the other party.
b. Subjective Arbitrator. The process of choosing an arbitrator is not always
an objective one. There are cases when the arbitrator could be biased
because it has a business relationship with one party or is selected by an
agency from a pool list. In those situations, impartiality is lost.
c. Unbalanced. Many arbitration clauses work in favor of a large employer or
manufacturer when challenged by an employee or consumer who does not
understand how arbitration works.
d. “Arbitrarily” (inconsistently) following the law. Although generally the
arbitrator is required to follow the law, the standards used are not clear. The
arbitrators may consider the “apparent fairness” of the respective parties’
positions instead of strictly following the law. This is important especially if
your party would be favored by a strict reading of the law.
e. No jury. For most, having a jury is an important right that helps prevent
biases and unfairness. Arbitration eliminates juries entirely, leaving matters
in the hands of a single arbitrator, who acts as both judge and jury.
f. Lack of transparency. Arbitration hearings are generally held in private
which may be a positive to many. However, it is possible that this lack of
transparency makes the process more likely to be biased, which may be
problematic because arbitration decisions are also infrequently reviewed by
the courts.
2. Finality: No appeals. While this may be a positive if you find the arbitration decision
favorable, you should be aware that if arbitration is binding, both sides give up their
right to an appeal. If one party feels the decision is erroneous, there is very limited
opportunity to correct it.
3. Can be more expensive. There are many cases in which arbitration can become
more expensive than court proceedings. Quality arbitrators can demand
substantial fees that would not apply in court. In non-binding arbitrations, the final
decision or award in the case is not "binding" and the parties are free to take their
issue back to court, essentially adding the cost of litigation to that of the prior
arbitration. If you are on the employer side, employers must pay the arbitrator’s

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fees in full. This can be very expensive as arbitrators’ fees can be very high for
cases in employment law.
4. Unpredictability: Unconventional outcomes. As stated earlier, arbitration does not
necessarily follow the formal rules of procedure and evidence that are involved in
a courtroom trial. Rules of evidence may prevent some evidence from being
considered by a judge or a jury, but this limitation does not apply to arbitrators.
Thus, an arbitrator’s decision may be based on evidence that a judge or jury would
not consider at trial, which could be damaging to your case. On the other hand, if
certain information from a witness is presented by documents, then there is no
opportunity to cross-examine the testimony of that witness.
An arbitrator may make rulings that would not be appropriate in court or may
push for unconventional solutions that you were not expecting. This could both be
a pro or con, so you must carefully evaluate how this may affect your desired ruling.
F. LITIGATION
The process of taking a dispute to a court of law is known as litigation. If parties

are unable to reach an agreement on the fair and proper resolution of a dispute, they will
present their cases to a court for decision. It is a broad term that refers to a lengthy and
complex process.
Cases that can be solved using litigation
❖ Commercial disputes particularly claims for breach of contract such as

damaged goods or recovery of debts;
❖ Matrimonial matters e.g. determining the extent of a spousal claim in a
divorce action;
❖ Claims against the state e.g. A judicial review of a planning decision;
❖ Personal injury claims e.g. monetary claims arising out of an accident where
a person suffered harm;
❖ Employment disputes e.g. a claim for wrongful dismissal.
Process of litigation
1. The litigation process can be divided into three broad stages:

2. Issuance of proceedings and filing of a defense
3. Pre-trial procedures
4. Trial
ADVANTAGES
1. Litigation has clear procedural and evidential rules.

2. It enforces formal process of evidence disclosure (witness statements and expert
evidences) including inspections.
3. Parties in dispute can employ procedural rules and interim remedies.

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4. The pre-trial discovery and resulting familiarity with the case increase the
chances that the case will be settled.
5. Both parties can feel that they have taken part in the decision, rather than having
had a resolution forced upon them.
DISADVANTAGES
1. A major downside to litigation is that any available judge can take the case. This
makes it very difficult for someone without extensive knowledge regarding specific
industries to judge a case.
2. Litigation is time-consuming wherein both parties often wait for months before a
ruling in the case can be achieved.
3. Litigation process is a very complicated process. It needs to go through numerous
steps and stages before the trial start. It also takes a long time to complete the pre-
trial stages.
4. Litigation can be an extremely expensive undertaking. While it is true that in most
cases the successful party can claim its legal costs from the other, it is unlikely that
a party would be able to recover all of its legal costs.
5. Litigation is not a process of solving problems, but a process of winning arguments.
Well-privileged parties are the only ones capable of hiring experienced and
excellent lawyers to engage in the lawsuit. Additionally, a judge or a jury can be
easily convinced by a good lawyer who has strong convincing skill.

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Republic of the Philippines

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

FACULY MARKED ASSIGNMENT NO. 8

THE COUNTRY’S 1st POLYTECHNICU

Construction Dispute Resolution Strategies

THE COUNTRY’S 1st POLYTECHNICU

Benefits to architect/engineering consultants

Arbitration is another alternative to litigation and is a process in which the parties

THE COUNTRY’S 1st POLYTECHNICU

1. less complicated and relatively quick in court proceedings

1. Its fairness is questionable

Mediation is often known as "assisted negotiating." The parties choose a neutral

THE COUNTRY’S 1st POLYTECHNICU

D. A binding and enforceable agreement can be used to record agreed-upon

THE COUNTRY’S 1st POLYTECHNICU

The arbitration process may be either binding or non-binding. When arbitration is

THE COUNTRY’S 1st POLYTECHNICU

a. Mandatory arbitration. If arbitration is mandatory by contract, then the

THE COUNTRY’S 1st POLYTECHNICU

The process of taking a dispute to a court of law is known as litigation. If parties

Cases that can be solved using litigation

❖ Commercial disputes particularly claims for breach of contract such as

1. The litigation process can be divided into three broad stages:

1. Litigation has clear procedural and evidential rules.

THE COUNTRY’S 1st POLYTECHNICU

THE COUNTRY’S 1st POLYTECHNICU

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