A Framework of Dispute Avoidance and Resolution
of Construction Project management
Xinhua He
School of Economics Management
Shanghai Maritime University
Shanghai, China
xhhe@sem.shmtu.edu.cn
Abstract— Construction project management is full of risks
where construction industry witnesses disputes and claims in
every one construction project since claims and disputes are
popular in construction industry. When steady development of
Chinese economics keeps on astonishing the world, many
international contractors are sharing opportunities of
construction projects while others are struggling against tedious
disputes in projects. Chinese culture and governance also affects
construction management pattern and negotiation tactics in
projects. Construction professionals need more knowledge and
skills to manage and resolve conflict and disputes efficient and
effectively, and the project progress and quality of the product
will be improved. This paper reveals an effective approach to
avoid and resolve construction disputes in construction project
management. At the same time, this paper describes an effective
dispute resolution mechanics combined with third-party and
local authorities. Although dispute administration is not the
ultimate or compulsory process in resolving the construction
dispute, the administration framework might affect construction
project management and dispute administration is a unique and
effective option in project management market. This electronic
document is a “live” template. The various components of your
paper [title, text, heads, etc.] are already defined on the style
sheet, as illustrated by the portions given in this document.
Keywords-project management; dispute avoidance and
resolution;framework
I. INTRODUCTION
Construction project management is full of risks where
construction industry witnesses disputes and claims in every
one construction project. Since competition becomes more
intense than ever during the economic slowdown and crisis,
low-bid procurement is adopted in nearly every construction
project, where contractors submit their lowest bid for a
potential contract award. But the contractors will definitely
file an abundance of claims as they could during project
implementation after contracts are awarded. In China’s
construction market contractors intend to bid low in a
competitive bidding project, and hope to recover the initial
loss through claims of contracts and changes of construction.
So claims and disputes are popular in construction industry.
When steady development of Chinese economics keeps on
astonishing the world, many international contractors are
sharing opportunities of construction projects while others are
struggling against tedious disputes in projects. International
978-1-4244-5326-9/10/$26.00 ©2010 IEEE
construction projects in China are increasing and attractive
since China became a member of World Trade Organization in
2001. Unfortunately, the disputes are widespread in
construction industry since the participants are impossible to
understand local comprehensive cultures or administration
structure well in such limited time. An international contractor
might obey construction drawings, contracts and specifications
easily, but any misunderstanding or improper behaviors in the
international projects would bring out conflicts and disputes
over the implementation of the projects. Since the participants,
who come from different countries, grow up in different social
and cultural circumstances, they are easy to confront disputes
and conflicts[1].
Construction conflicts are popular but solved inefficiently
based on international laws because construction management
is more regulated by domestic laws and regulations rather than
international laws and rules. There are fewer international
organizations that have set rules or customs for international
construction, and those rules customs are not compulsive in
project management. Though FIDIC has developed several
standard contract forms and arbitration regulations in last 40
years, disputes are popular in international construction
projects and the resolution is costly and time-consuming.
Chinese culture and governance affects construction
management pattern and negotiation tactics in projects. This
paper reveals an effective approach to avoid and resolve
construction disputes in Chinese construction industry[2].
II. CLASSIFICATION OF CONSTRUCTION DISPUTES
Disputes in construction projects are attributed to the
complicated relationships and interesting conflicts of different
organizations, which are temporarily assigned with the
responsibilities by construction contracts and regulations. Each
one of the project participants manages the same construction
project by his organization’s regulations and culture, and the
manager cares more about his organization’s interests rather
than others. In a low-bidding-award construction project, the
construction disputes increase remarkably between the
contractors and the developer because the contractors need
more claims to cover their potential loss. More and more
contractors tend to make use of any tiny contract’s fault in the
low-bidding contract conditions, but those kinds of tiny fault
seldom become contractors’ claims and conflicts in another
kind of contract conditions. Of course, not one contract is
perfect when it is signed between the developer and the
contractors in the beginning of the project, contracts are
invariably incomplete due to uncertainty. Disputes exist in
every one construction project[3].
Construction disputes primarily involve delays on
interdependent construction phases due to mismanaged time,
inefficient processes and unclear contract terms that all
undermine the business relationship between contractors,
consultants and clients. Project managers usually spend as
much as 70% to 80% of their time resolving conflict and
disputes. Construction professionals need more knowledge and
skills to manage and resolve conflict and disputes efficient and
effectively, and the project progress and quality of the product
will be improved.
There are some leading key complexities faced in the
construction projects:
(1) Validity of instructions from client or consultants to
contractors and engineers;
(2) Misconceived understanding by clients regarding the
deliverables or services promised by contractors. Clients can
assume they are entitled to ask for further support or
specifications than the contractor has agreed to or can do;
(3) Weak management skills in the areas of legalities and
dispute resolutions that prolong conflicts;
(4) Cultural diversity that leads in many cases to poor
communication and understanding among the different parties
to the contract.
Conflict is the nature of construction projects in either
matured construction market or dynamic market. With
obstacles of knowledge and experiences, construction parties
might feel frustrated when conflicts are inevitable in
construction management. It is important for construction
managers to avoid dysfunctional conflicts and promote
functional views.
Construction disputes could be resolved between the two
parties: contractors and clients, but usually these disputes or
disagreements require either a third party or legal consultant to
review facts before arbitration or jurisdiction. The third party
or consultant with project participants could try to restore
amicable relations and reach at a mutually acceptable decision
without causing major delays or setback to the projects[4].
If the disputes are resolved under a lower level, for example
by participants only, or by third-party, the relations between
contractors and clients could maintain friendship and
cooperation. If the disputes in an international construction
project must be solved through arbitration or jurisdiction, the
relation between contractors and clients would no longer be
friendly, and they might become more hostile during
arbitration or jurisdiction. But the hostile relations actually are
not expected by either contractors or clients, because these
relations could not help to implement any construction project.
All construction participants implement the project based
on the contract documents and conditions such as bill of
quantities, construction drawings, general contract conditions,
particular contract conditions, project agreements and project
management[5]. The construction goal and procedures are
interpreted by people from the contract documents and
conditions and are carried out by people, too. Therefore,
construction disputes arise from contract documents and
conditions, from management phases of the construction
project, from construction participants, from project social and
physical environments, and from aspects of the project.
Sources of construction disputes can be classified into different
categories in the systematic view shown in Table 1.
III. EFFECT OF CONSTRUCTION ADMINISTRATIVE
STRUCTURE ON DISPUTE AVOIDANCE AND RESOLUTION
The Chinese government structure consists of four levels:
central government, provincial-level government, district-level
government, and county-level government. Accordingly each
government has similar construction administration
departments. For example, The Ministry of Housing and
Urban-Rural Development is a branch of the Council of State,
the commission of construction in provinces or province-level
cities is a department of provincial government, the
commission or bureau of construction in districts or district-
level cities is a department of district government, the
commission or office of construction in counties or county-
level cities is a department of county government. Higher-level
commission of construction management will supervise its
construction market and lower-level commissions of
construction management. All construction administrative
departments form a comprehensive government supervision
system and structure. The Chinese government administration
structure in construction market is shown in figure 1.
The Ministry of Housing and Urban-Rural Development
regulates the nationwide construction standardization, monitors
the construction market, and develops specific implementation
plans in conjunction with the relevant ministries. The
provincial and lower-level governments in accordance with
their departments of construction carry out their duties to
supervise and administrate the construction projects and
monitor the construction market.
IV. A FRAMEWORK OF DISPUTES AVOIDANCE AND
RESOLUTION IN PROJECT MANAGEMENT
A. Mechanics of Disputes Avoidance and Resolution in
Construction Projects
A third-party is introduced to the traditional construction
management structure in the international construction market.
The third-party is the supervising engineer while the consultant
engineer is the third-party in FIDIC construction condition, or
the architect/ engineer/ construction manager is one of the
third-parties in AIA construction condition. The third-party
could reduce disputes between clients and contractors by his
professional knowledge. The third-party could negotiate with
clients and contractors well as an independent participant, and
the disputes might be solved under an amicable condition
which will benefit both clients and contractors.
 TABLE I. CLASSIFICATION OF CONSTRUCTION DISPUTES
Area Discipline Classification of disputes
Organizational Structure Internal/external organizational structure, delivery systems, inappropriate contract type, contract
issues documents, contract terms, and law
Process Performance, quality, tendering pressures, payment, delays, disruption, acceleration,
administration, formal communication channels, information sharing, reports and poor
communication
People Misunderstandings, unrealistic expectations, culture, language, communications, incompatible
objectives, management, negligence, work habits, and lack of team spirit
Uncertainty External Change, variations, environmental concerns, social impacts, economics, political risks, weather,
regulations, and unforeseen site conditions
Internal Incomplete scope definition, errors in design, construction methods, and workmanship
Branches

Fig. 1 Governmental Administration Structure and System in Chinese Construction Market


Chinese government system provides another efficient
solution approach to international project disputes among
construction participants. All construction participants and
activities should be regulated by local authorities. In detail,
Chinese government has set up many regulations and
ordinances to monitor life-cycle of international construction
project, and supervise the behaviors of each construction
participant. Though local authorities regulate construction
activities for secure construction safety and quality, these
regulations from local authorities could maintain a fair and
reasonable relationship among construction participants, and
then local authorities could indirectly coordinate the disputes in
international construction projects.
This mechanics of disputes resolution by third-party and
local authorities is shown in figure 2.
te Local authorities
Regula
Client
Disputes
Architect
Coordinate
Engineer
Contractors
Construction Manager
Third-party
Figure 2. Mechanics of disputes resolution by a third-party or local authorities
B. A framework of Disputes Avoidance and Resolution in
Project Management
The primary aim of third-party or local authorities in
dispute resolution involves offering alternative dispute
resolutions and explaining the applicability and feasibility of
these alternatives to both clients and contractors in order to
create a comprehensive understanding and satisfying solution
for both parties.
If a dispute occurs in a construction project, construction
participants should negotiate it in a friendly manner and solve
it from lower levels inside construction project teams. Dispute
resolution from lower levels could circumscribe project
disputes and conflicts around amiable cooperative conditions
for construction participants. A framework of the dispute
resolution process is suggested for international construction
projects in Figure 3.
Sometimes experts of construction laws are better equipped
to understand the intricacies involved with
international and local construction management. The
disputes could be inside the project, and construction project
team members or project managers could coordinate and
negotiate directly and then solve the disputes, or the disputes
could be resolved through third-party.
If intra-project dispute could not be solved in time, the
dispute would become a extra-project conflict which need
negotiation between client’s company and contractors’
company or regulation by local authorities, arbitrators, or
judgers.
Figure 3. A framework of dispute resolution process in project management
ACKNOWLEDGMENT
The research was supported by fund of Shanghai Maritime
University (2008438).
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