Research Proposal E Construction Dispute Model Construction Essay

Construction industry cannot avoid from disputes as many parties involved in one industry. All the parties insert dispute resolution mechanisms into the contract in the hope that the disputes can be avoided or solved as quickly as they can as they arise. If disputes are not managed properly, they tend to drag on and escalate to cause projects delays and ultimately ruined the relationships. There is now a wide armoury of dispute resolution methods available for resolving construction disputes. The most popular out of these being litigation and alternative dispute resolution (ADR) processes such as arbitration, mediation, and conciliation. These dispute resolution processes suffer two key disadvantages, which arise from the fact that these processes only come into play after a dispute has arisen. One disadvantage is that, during the dispute resolution process, trust between the parties may be sorely tested, or even destroyed. The other disadvantage is that the time and cost of resolving a dispute may affect the expected project gains of parties concerned. It is essential in construction industry to adopt an anticipative approach to management. Since disputes have been one of the major factors affecting cost and time, it is necessary to determine the classification of dispute from the construction law cases and then the e-CDM can be the tool/database to prevent the conflicts or disputes at any stages of construction. By having thorough knowledge and information in this tool/database, it will definitely help the project manager and contract manager to anticipate problems at an early stage of the project without going through any other Alternative Dispute Resolution method which will cost extra money on the top of the project cost.

INTRODUCTION

Malaysia has been developing rapidly in tandem and racing a head to become industrialised nation. Undoubtedly, the building and construction industry are instrumental as the driving forces to contribute towards realising this aspiration. The construction industries are expected to play a vital role by contribution of 11.2% to the gross domestic product (GDP) in 2013. [1] According to CIDB Chief Executive Datuk Sri Dr. Judin Abdul Karim, the construction industry is expected to secure RM 120bil worth of the project in 2013. [2] In order to achieve this encouraging but challenging target, the Government and the private sector must work closely together to ensure projects under the Economic Transformation Program (ETP), the Entry Point Project (EPP), project under the 5 corridors and the Greater Kuala Lumpur and Klang Valley are implemented in the timely manner to avoid any delays that would increase cost.

The construction industry in Malaysia is fast growing and in light of the economy uncertainty, the world is now facing, great challenges face players in the industry. Dispute amongst parties involved in the industry are unavoidable. It would be impossible to create an environment where the industry would not be affected but great effort should be expended to minimize the effect that would be failing the industry. To do so, it is important that disputes be resolved in the most expedient and economic manner to enable parties in the industry to move forward without being badly affected.

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BACKGROUND STUDY

Modern day construction projects vary from simple houses for individuals to complex infrastructure projects for governments. Some construction projects may even involve cross border movement of resources and not limited to the control of a single jurisdiction. A variety of factors, including, unfair allocation of risks, multiple contracts, unrealistic expectations and schedules, poorly drafted or inadequate contract documents, design omissions, tighter funding, the lack of experienced personnel, communication problems, and even the state of the economy, add to the complexity of construction projects. As a result, construction projects are a breeding ground for contractual dispute.

Cooke J in Canterbury Pipe Lines Ltd v Christchurch Drainage Board [3] said ‘Building contracts have been traditionally a fertile source of disputes…’ The enunciation aptly summarizes the very nature of construction industry as an industry notorious for complex disputes. [4] The primary cause of such disputes arises from inadequate legal knowledge. [5] Majority of construction practitioners comes from technical engineering and architectural background without adequate legal knowledge in contracts and this has led to numerous disputes in construction contracts.

Lack of knowledge in construction laws by construction players has been the leading cause of dispute. Employers, Consultants and Contractors though with years of experiences in the industry are usually lacking of the legal knowledge and understanding on the operation and effects of various clauses in construction contracts in general and handling dispute. The lacking in understanding the legal and contractual aspects of contract may be caused by not having the experience to undergo the process itself or just plain ignorance of the topic overridden by over-zealous attitude of churning maximum profits and in the understanding that legal experts are there to provide all the required advice and service. Lack of knowledge in construction law will lead to wrong interpretation of contracts in which the party tends to take trivial matters to the dispute.

Construction industry cannot avoid from disputes as many parties involved in one industry. All the parties insert dispute resolution mechanisms into the contract in the hope that the disputes can be avoided or solved as quickly as they can as they arise. If disputes are not managed properly, they tend to drag on and escalate to cause projects delays and ultimately ruined the relationships. Lord Denning [6] , when commenting on construction disputes, is quoted as saying;

“One of the greatest threats to cashflow is the incidence of disputes. Resolving them by litigation is frequently lengthy and expensive. Arbitration in the construction context is often as bad or worse”

According to Hibberd and Newman [7] , litigation gains an unpopular name when time goes on. They quote that ‘A substantial majority (70%) suggested the whole system takes too long, whilst almost 30% suggested that the costs of litigation are far too high’. As the litigation cannot solve dispute effectively, arbitration had been introduced. Professionals believed that arbitration can solve the problems without ignoring the main desire of clients. Most of the clients depend on those who know contract better than them. They hope these professional can help them with the lowest cost and fastest way to solve the problem.

There is much truth in the old adage that ‘prevention is better than cure’. The various dispute resolution processes referred to mediation, conciliation and arbitration all suffer two particular disadvantages, which arise from the fact that these processes only come into play when a dispute has crystallized. One disadvantage is that, during the dispute resolution process, trust between the parties may be sorely tested, or even destroyed. The extent to which this occurs is likely to be proportional to the time and cost (in both money and resources) of resolving the dispute. As ongoing trust between contracting parties is such an essential ingredient of healthy and efficient project delivery, this can be a significant disadvantage in a continuing relationship such as will typically be found in a BOOT project. The longer and more acrimonious the dispute resolution process, the greater the likelihood that there will be a loss of trust in any continuing relationship.

By having a readily accessible resource such as e-Construction Dispute Model (e-CDM) which the parties can access during the course of the project at any construction stages, the impact of disputes is minimized. In contrast to the dispute resolution processes earlier described, e-CDM seek to avoid or minimize the incidence of disputes by a timely, little costly and relatively informal process which takes place while the work is in progress. Used effectively, they can lead to a reinforcement and enhancement of trust, with a positive impact on the project as construction unfolds.

PROBLEM STATEMENT

The construction industry is notorious for high levels of conflicts and disputes. It is a project based industry with each project being unique. Some construction projects may even involve cross border movement of resources and not limited to the control of a single jurisdiction. A variety of factors, including, unfair allocation unfair allocation of risks, multiple contracts, unrealistic expectations and schedules, poorly drafted or inadequate contract documents, design omissions, tighter funding, the lack of experienced personnel, communication problems, and even the state of the economy, add to the complexity of construction projects. As a result, construction projects are a breeding ground for contractual disputes. [8] 

It could be said that the adversarial nature of the construction industry contributes to the germination and manifestation of construction disputes. As such, the construction industry has been at the forefront of the search for effective and efficient dispute resolution mechanisms. Project procurement and construction disputes are two of the major concerns in the construction industry worldwide. [9] There is now a wide armoury of dispute resolution methods available for resolving construction disputes. The most popular out of these being litigation and alternative dispute resolution (ADR) processes such as arbitration, mediation, and conciliation. These dispute resolution processes suffer two key disadvantages, which arise from the fact that these processes only come into play after a dispute has arisen. One disadvantage is that, during the dispute resolution process, trust between the parties may be sorely tested, or even destroyed. The other disadvantage is that the time and cost of resolving a dispute may affect the expected project gains of parties concerned. In the circumstances, the current trend is to look for methods other than processes such as litigation, arbitration, mediation, and conciliation that could be put in motion before or at least, soon after a conflict has arisen. The aim is to ensure that dispute prevention measures, or at least measures for minimizing the scope of any dispute is put in place before the parties’ positions have hardened.

Traditionally, resolving construction disputes are done through litigation. This can be confirmed by 72 cases related to building contract being reported by the Malayan Law Journal between 1990 and 2007 and the Current Law Journal which reported about 200 cases of construction related issues since 2004. [10] Yet, today the litigation procedures have fallen into disrepute, particularly due to excessive costs, delays, procedural complexity and adversarial approach. [11] The earlier research have come out with the new approach by developing eDR model but it only focus on on contractual variations [12] in construction projects. The lacking of law knowledge in every term of contact still needs to be addressed.

It is essential in construction industry to adopt an anticipative approach to management. Since disputes have been one of the major factors affecting cost and time, it is necessary to determine the classification of dispute from the construction law cases and then the e-CDM can be the tool/database to prevent the conflicts or disputes at any stages of construction. By having thorough knowledge and information in this tool/database, it will definitely help the project manager and contract manager to anticipate problems at an early stage of the project without going through any other Alternative Dispute Resolution method which will cost extra money on the top of the project cost.

RESEARCH OBJECTIVE

The objective of this study are:

To classification the types of dispute in the Malaysian construction industry base on the related law cases;

To develop an e-CDM model as the database for construction industry; and

To develop an application of e-CDP prototype/system based on types of the disputes, the parties involved, type of the project, when do the disputes occurred, and standard form of contract for the project.

RESEARCH AIM

The research has highlighted the problem statements on poor understanding of contract administration and lack of contractual knowledge toward the most litigious issue in construction. Therefore, the aim of this research is to classify the types of dispute based on related law cases in construction and subsequently propose and develop eCDM tool/database on construction disputes as an alternative way for resolving disputes in construction projects.

SCOPE OF STUDIES

This research is limited to the following:-

a) To construction disputes reported by Malayan Law Journal.

b) Cases related to Building Contract in Malaysia.

RESEARCH METHODOLOGY

Briefly, this research will be carried out with five (5) different stages:

Identifying the research issue

Literature review

Data and information collection

Data and information collection

Research analysis

Data and information collection

Conclusion and recommendations

Data and information collection

Identifying the Research Issue

Identifying the research issue is the very initial stage from the whole research. Initial literature review was done in order to obtain the overview of the particular research topic. In identifying the issue, firstly, it will involves reading on various sources of published materials such as journals, articles, seminar papers, cases, previous research papers, or other related research materials, newspapers, magazines and electronic resources as well as World Wide Web and online e-databases from UM library’s website. [13] At the same time, discussions with supervisors, lecturers, as well as course mates have been done to gain more ideas and knowledge relating to the topic.

Literature Review

The second stage in executing a research is literature review. Literature review stage is basically a stage when the researcher will be reading and also need to criticize on each and every material that has been read. Published resources, like books, journals, varies standard form of contract and related statutory are the most helpful sources in this stage. Literature review also will be involving the collection of documents from the secondary data research, such as books, journals, newspapers. [14] 

Data and Information Collection

This stage is data and information collection stage. This is an important stage towards achieving the objectives of this research. In this stage, the further action is to collect the relevant information based on the secondary data from the published resources. Lexis-Nexis database which provides cases of Malayan Law Journal is the main sources in getting the related cases.

Research Analysis

During this stage, all of the data collected data, information, ideas, opinions and comments were specifically arranged, analyze and also will be interpreted based on the literature view which will be carried out. This stage also could be called as the heart of the research as from this chapter; we can see how the objective has been achieved.

Conclusion and recommendations

Conclusion and recommendations is the final stage of the research. In this stage the findings will be able to show the result of the research. A conclusion needs to be drawn in-line with the objectives of the research. At the same time, some appropriate recommendations related to the problems will be made for a better solution in relation to the said problem.

CONCLUSION

Disputes between parties to construction projects are of great concern to the industry; nevertheless, the subject is dominated by anecdote and hearsay. The study of construction industry disputes, and the causes of those disputes, is essential. In fact, it would seem that effective management action can be taken only if based on reliable evidence and as contract manager it is essential for them to consider all kinds of dispute in construction industry.