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MODULE IX: DISPUTES – HOW TO MANAGE

THEM, BUT BETTER STILL, HOW TO PREVENT
THEM

• Administering monetary claims and successful

project completion according to contractual
objectives
• Recovery of loss and expense in unforeseen
circumstances
• Dispute resolution: Prevention of disputes
before the molehill becomes a mountain
How to prevent disputes

Activity - “A claim conundrum”

1

What are the main

reasons for
contractual
disputes?

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What issues
normally give rise
to valid claims
under contracts?

Errors in Employer’s Contract

Documents

The Contractor is not responsible for

design. One day he notes that the
Design Drawings state that concrete
walls have to be built using Class A
concrete, whilst the Specification
states that the walls have to be built
using Class B concrete.

What should he do? Can he be paid

for delays and costs incurred in
dealing with the issue?

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Adjustments due to statutory changes

Can the Contractor claim time and/or costs

for the following?

• A new law which states that all

labourers must be paid a basic wage
of $x per hour?

• A new law which states that no

construction work is to be carried out
on Sundays?

• New statutory changes to design

standards for electrical installations?

MODULE X: FORESEEABLE DEVELOPMENTS

IN CONSTRUCTION CONTRACTS AND THEIR
IMPLICATIONS ON CONSTRUCTION
PROJECTS

• New developments in construction contracts

• Partnering and alliancing arrangements
• PFI/BOT/BOOT Contracts

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The Future?

Kelvin Hughes
KH Consultants

Partnering?

Kelvin Hughes
KH Consultants

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"A long-term commitment between

two or more organisations for the
purpose of achieving specific
business objectives by maximising
the effectiveness of each
participant's resources... the
relationship is based upon trust,
dedication to common goals and
an understanding of each other's
individual expectations and
values."
The US Construction Industry Institute

Kelvin Hughes
KH Consultants

Culture Change

The Past:

Contract Conditions:

• lay-off all risk

• create open ended liability

The Future:

Relationships

Kelvin Hughes
KH Consultants

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"forming a new team for every project on

the basis of competitive selection may
reduce project costs by a few per cent,
but the research findings show that the
potential for realising savings are of an
order of magnitude greater than this
through a closer integration of the
design, procurement and construction
processes".

BAA/Lend Lease

Kelvin Hughes
KH Consultants

11

“Contract writers must

realise that it is
impossible to manage
today’s projects using
yesterday’s
contracts.”

(University of Illinois Research

Project 1986)

Kelvin Hughes
KH Consultants

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“….what is more important is

the existence of a common
understanding of the basis
of any agreement between
two or more parties. It is
through the conduct of
partnering that common
understanding can be
reached between two or more
companies.”

(Agile Construction Initiative report to HM

Treasury in October 1998)

Kelvin Hughes
KH Consultants

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“… the so called project team. As teams go it

really is rather peculiar, not at all like a
cricket eleven, more like a scratch bunch
consisting of one batsman, one goal
keeper, a pole vaulter and a polo player.
Normally brought together for a single
enterprise, each member has different
objectives, training and techniques and
different rules. The relationship is
unstable, even unreliable, with very little
functional cohesion and no loyalty to a
common end beyond that of each member
coming through unscathed.”

Denys Hinton, 1976

Kelvin Hughes
KH Consultants

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“Partnering is where a
group of contractors get
in bed together - the
trouble is the main
contractor usually has
all the bedclothes”.
(A specialist contractor quoted in
“Unlocking Specialist Potential”)

Kelvin Hughes
KH Consultants

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• Project Partnering

• Strategic
Partnering

Kelvin Hughes
KH Consultants

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What are the

advantages of
Partnering?

Kelvin Hughes
KH Consultants

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• Better Relationships?

• Fairer allocation of risk?

• Earlier involvement by all

parties?

• Greater certainty of time,

cost and quality?

• Time and Cost Savings?

• Fewer claims?
Kelvin Hughes
KH Consultants

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What are the

disadvantages of
Partnering?

Kelvin Hughes
KH Consultants

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• Unclear definition of parties

rights and obligations?

• Only good for large or

repeated projects?

• Not suitable for all cultures?

• Not suitable for all projects?

• Not suitable for public works

projects?
Kelvin Hughes
KH Consultants

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The Private
Finance
Initiative (PFI)

Kelvin Hughes
KH Consultants

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Used for
government
contracts
• Schools
• Hospitals
• Prisons
• Highways

Kelvin Hughes
KH Consultants

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PFI – The Private Finance

Initiative
(Also “Public Private
Partnership” PPP)

• The Contractor is responsible (normally

with other joint venture partners) for the
design, build, finance and operation
(DBFO) of the building.

• Normally over 25 to 30 year concession

period.

• Payment to the joint venture partners is

normally by leasing the facility back to
the government.
Kelvin Hughes
KH Consultants

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