Professional Documents
Culture Documents
Conflicts, Claims and Disputes in Construction
Conflicts, Claims and Disputes in Construction
INTRODUCTION
Conflict has been defined (Collins 1995) as `serious disagreement and argument
about something important' and also as `a serious difference between two or more
beliefs, ideas or interests'. Since conflict is `inevitable in human relationships'
(Rhys Jones 1994), it is predictably preponderant in projects where human rela-
tionships proliferate, as in construction. Figure 1 illustrates the many interacting
potential sources of conflict in construction scenarios. Conflicts can arise both
within systems (such as A, B and C), as well as at the interfaces of such source
systems (such as D, E, F and G). Analysing further, conflicts may be discerned
within and between subsystems (e.g. B1 to B4, D1 to D4). The potential for
conflict is further magnified when incorporating the next layer of subsystems, such
as joint ventures and sub-contractors.
Despite the potentially unpleasant connotations and consequences of conflict,
beneficial aspects of conflict have also been recognized, and conflict management
has been said to be a major component in construction project management
(Gardiner & Simmons 1995). For example, a conscious shift of conflict occur-
rences from the construction to the conceptual design stage is seen to contribute
to more creative and constructive inputs, in comparison to what may have tran-
spired in the absence of such conflicting views. The cross-fertilization of ideas and
the consideration of more alternatives, through such constructive conflicts at the
design stage, would usually lead to `better' designs as well. Figure 2 illustrates this
potential for properly managed conflicts to lead to improvements, say, in design or
construction methodologies, while other conflicts may result in self-destructive
disputes, either by themselves or through avoidable claims.
assertions for extra money or time. Claims on construction projects can be based
on the contract itself, a breach of contract, a breach of some other common law
duty, a quasi-contractual assertion for reasonable (quantum merit) compensation,
or an ex-gratia settlement request.
Some construction claims are unavoidable and in fact necessary, to con-
tractually accommodate unforeseen changes in project conditions or unavoidable
changes in client's priorities. While such claims may be settled amicably, the prior
presence of unhealthy conflict can trigger degeneration into unnecessary disputes.
Such scenarios can in turn generate unnecessary and/or unreasonable claims that
further escalate unhealthy conflicts and disputes. This possibility is also illustrated
in Fig. 2, which sets out the basic relationships between conflicts, claims and
disputes in construction scenarios. Disputes are taken to imply prolonged dis-
agreements on unsettled claims and protracted unresolved/destructive conflict.
Disputes may arise from different perceptions as to the legitimacy and/or the
quantum of the claim. Unhealthy tendencies to exaggerate claims ± by contractors
who underprice and are seeking quick gains, or who anticipate resistance to any
claim ± can be as damaging as over-protective rejection of claims by consultants
Figure 2 Basic relationships between conflicts, claims and disputes and potential outcomes.
who are apprehensive of being blamed for poor contract management, or for cost
increases. The consequential conflicts can lead to further claims and disputes. For
example, Jergeas & Hartman (1994) noted many avoidable claims on which
valuable resources are wasted.
It was thus considered useful to investigate the common sources of claims and
to differentiate the unavoidable/necessary from the avoidable/unnecessary claims.
In launching this investigation in Hong Kong in late 1993, it was felt necessary to
identify the root causes of claims as a necessary precursor to conclusions on their
avoidability or otherwise.
Categorization of claims
A classification of the `common' categories of construction claims encountered in
a particular country can be influenced by the claim category heads that are
permissible and `popular' under the prevalent conditions of contract. `Popularity'
of usage of particular claim category heads, while supposedly based on justifiable
causes, is also enhanced by the perceived potential of `success' in obtaining
compensation. This is borne out by anecdotal evidence of some claims being
shifted from one category that yields only `extra time' compensation (say, for
diversion of utility lines) to another which grants both `time' and `cost' com-
pensation (say, for non-possession of site). However, the general categories and
causes of common and significant claims that were observed in the author's
investigations in Hong Kong, were similar to observations in other countries such
as by Semple et al. (1994) in Canada, Heath et al. (1994) in the UK, Rhys Jones
(1994) mainly in the UK, Conlin et al. (1996) also in the UK, Watts & Scrivener
(1992) in Australia, Hewitt (1991) in general and Diekmann & Nelson (1985) in
the USA.
Tables A1 and A2 in the Appendix list the categories of cost and time claims
initially envisaged in Hong Kong, based on the Hong Kong Government Con-
ditions of Contract, whether for Building Works or Civil Engineering Works; while
Table A3 illustrates the categorization of significant claims, disputes and their
causes, by the aforementioned cross-section of authors. While noting the general
similarities, specific differences are seen to arise depending on the particular
contract regimes. For example, cost claims based on unforeseen ground conditions
are generally precluded under Hong Kong Government Conditions of Contract,
the risk being transferred to the contractors (Kumaraswamy et al., 1995).
Table 1 Extract a from table of `total claimed/original contract value', as a percentage, against each project,
and under each cost claim category
C1 20.98 20.98
C2 13.32 25.09 41.42
B3 0.00
C4 3.65 3.65
C5 0.00
C6 3.29 3.29
C7 2.00 2.00
C8 0.10 0.34 15.43
C9 2.21 2.21
C10 4.78
a
Only 10 of the 61 projects analysed and only 8 of the claims categories are indicated, to illustrate a sample of these results.
b
Cost claims categories as described in Table A1. c Contract codes are used for confidentiality (so as to avoid using contract/
project names). d This `total' represents `total claimed/original contract value' as a percentage, for each contract (and
includes other cost claim categories that are excluded in this extract).
be noted that the `average' values in each claim category are based only on the
number of projects on which they actually arose. Table 2 adds information (also
derived from the database) on the frequency of occurrence of such claims and also
on the frequency and relative magnitude of `success' of the claims in each cate-
gory. Figure 4 and Table 3 convey similar information pertaining to the time
claims in each category.
The graphical presentation of the `cost' and `time' claims data in Figs 3 and 4
highlights the categories where claims of relatively high magnitude commonly
arise, for example in relation to `variations' and `delayed site possession'. The
Figure 3 Averages and standard deviations of `claimed/original contract values' in common cost claim
categories.
Table 2 Selected `indicators' of cost claims' and `payments profile' in each cost claim category
e
Cost category descriptions are cited in Table A1 and Fig. 3. f Averages are derived from the database containing Table 1
(e.g. `average' row at the bottom of Table 1). ^OCV = original contract value.
tabular presentation of the `cost' and `time' claims data in Tables 2 and 3 also
indicates categories where claims arise more frequently, as reflected in the column
`No. of projects claimed/Total No. of projects'. For example, `variations' and
`inclement weather' appeared to be relatively frequent. The relative significance of
a claim category may then be assessed by combining the average magnitude with
the frequency. For example, `variations' would appear significant, being high in
both magnitude and frequency.
Figure 4 Averages and standard deviations of `claimed/original contract period' in common time claim
categories.
Table 3 Selected `indicators' of time `claims' and `extensions' profiles in each time claim category
h
Time claim category descriptions are cited in Table A2 and Fig. 4. i Averages are derived from the time claims database,
similar to that containing Table 1. j OCP = original contract period.
identify the causes underlying different claims categories, on the premise that if
the causes are identified, their controllabilities and hence avoidabilities can be
assessed more realistically. Difficulties in such identifications arose from most
claims being generated from overlapping causes and/or cumulative cause±effect
cycles. Studies in the next phase of the investigation are aimed at unravelling the
network of principal cause±effect interactions leading to particular categories of
claims.
client', it appears that almost all the proximate causes are also controllable to a
certain extent. Of course it is unlikely that all potential causes can be adequately
controlled simultaneously, given the multiple interacting subsystems and vari-
ables in any project. However, further study is needed to trace and isolate the
critical causes that give rise to `significant' categories of claims, so that manage-
ment attention may be focused on attempts to control the corresponding causes,
in order to avoid such `significant' claims as discussed in the previous subsection.
Table 4(a) Perceived significance of common categories of construction claims, as perceived by con-
tractors, clients and consultants, and listed in descending order of overall perceived significance
The `overall' indices are weighted to account for different numbers in the three groups: 8 from contractors, 21 from clients
and 17 from consultants; `e' signifies equal rank with another, in which case the next rank is by-passed; maximum index
value = 100.
Table 4(b) Perceived significance of common causes of claims, as perceived by contractors, clients and
consultants, and listed in descending order of overall perceived significance
The `overall' indices are weighted to account for different numbers in the three groups: 8 from contractors, 21 from clients
and 17 from consultants; maximum index value = 100.
from their ranking of the top ten categories and the top 10 causes. The metho-
dology used in computing the RAFs and PAs is based on that described by Okpala
& Aniekwu (1988). Whilst a certain degree of agreement is noted as to common
claims categories, the general collective disagreement as to causes of claims and
disputes is not surprising, given the different vantage points if not the vested
interests of clients, consultants and contractors. If there was no such disagree-
ment, disputes would undoubtedly be fewer. What is interesting, though, is the
high degree of disagreement that reflects a larger `bias' than expected by this
investigator, and therefore merits further investigation.
Table 5 `Rank agreement factor' (RAF) and `percentage agreement' (PA) between different project parti-
cipants as to the common categories of claims and common causes of claims
Since these results are from a pilot survey with small samples, the results are only indicative and not conclusive. The refined
questionnaire is being circulated. `Rank agreement factor' and `percentage agreement' were computed through formulae
(Okpala & Aniekwu 1988), based on the relative rankings by each group, as ranked in Tables 3 and 4.
CONCLUDING OBSERVATIONS
ACKNOWLEDGEMENTS
References
(AGC) (1991) Partnering ± a concept for success. Associated General Contractors of America,
Washington D.C.
Bristow, D.J. & Vasilopoulos, R. (1995) The new CCDC 2: facilitating dispute resolution of con-
struction projects. Construction Law Journal, 11, 95±117.
Chan, C.W. (1994) Case studies in Civil Engineering Claims. M.Sc. (Eng.) Dissertation, Department of
Civil & Structural Engineering, The University of Hong Kong.
Cheng, K.S. (1994) Classifying Common Causes of Construction Claims in Hong Kong. M.Sc. (Eng.)
Dissertation, Department of Civil & Structural Engineering, The University of Hong Kong.
Collins (1995) Collins Cobuild English Dictionary. Harper Collins, London.
Conlin, J.T., Langford. D.A & Kennedy, P. (1996) The relationship between construction procure-
ment strategies and construction contract disputes. CIB W92 `North meets South' Procurement Systems
Symposium Proceedings. (ed. R.G. Taylor), pp. 66±82. Durban, South Africa.
Denning, J. (1993) More than an underground success. Civil Engineering, 63, (12) 42±45.
Diekmann, J.E. & Nelson, M.C. (1985) Construction claims: frequency and severity. Journal of
Construction Engineering and Management, 111, (1) 74±81.
Eggleston, B. (1993) The ICE Conditions of Contract: Sixth Edition ± A User's Guide. Blackwell Science,
Oxford.
Gardiner, P.D. & Simmons, J.E.L. (1995) Case explorations in construction conflict management.
Construction Management and Economics, 13, 219±234.
Heath, B.C., Hills, B. & Berry, M. (1994) The nature and origin of conflict within the construction
process; construction conflict: management and resolution (ed. P. Fenn) Proceedings of the CIB TG15
Conference, Kentucky. CIB Publication, 171, 35±48.
Hewitt, R. (1991) Winning Construction Disputes ± Strategic Planning for Major Litigation. Ernst and Young.
ICE (1991) Conditions of Contract for Works of Civil Engineering Construction, 6th ed. Institution of
Civil Engineers, London.
Jergeas, G.F. & Hartman, F.T. (1994) Contractors' claims avoidance. Journal of Construction Engi-
neering and Management, 120, (3) 553±560.
Kumaraswamy, M.M., Miller, D.R.A. & Yogeswaran, K. (1995) A construction risks `underview' (of
ground condition risks in Hong Kong). Construction Law Journal, 11, (5) 334±342.
Latham, M. (1994) Constructing the Team. HMSO, London.
Ng, Y.T. (1994) Conflict Management in Civil Engineering Construction ± a Case Study Approach. M.Sc.
(Eng.) Dissertation, Department of Civil & Structural Engineering, The University of Hong Kong.
Okpala, D.C. & Aniekwu, A.N. (1988) Causes of high costs of construction in Nigeria. Journal of
Construction Engineering and Management, 114, (2) 233±244.
Powell-Smith, V. & Stephenson, D. (1993) Civil Engineering Claims. Blackwell Science, Oxford.
Rhys Jones, S. (1994) How constructive is construction law? Construction Law Journal, 10, 28±38.
Semple, C., Hartman, F.T. & Jergeas, G. (1994) Construction claims and disputes: causes and cost/
time overruns. Journal of Construction Engineering and Management, 120, (4) 785±795.
Sykes, J.K. (1996) Claims and disputes in construction: suggestions for their timely resolution. Con-
struction Law Journal, 12, (1) 3±13.
Wall, C. (1994) The dispute resolution adviser system in practice; construction conflict: management
and resolution (ed. P. Fenn). Proceedings of the CIB TG15 Conference, Kentucky. CIB Publication,
171, 154±167.
Watts, V.M. & Scrivener, J.C. (1992) Review of Australian building disputes settled by litigation.
Construction Conflict Management and Resolution (eds P. Fenn and R. Gameson), pp. 209±218. E. and
F.N. Spon, London.
APPENDIX
Table A1 Cost claim categories chosen in this investigation
CC 1 Ambiguity in documents
CC 5 Disposal of fossils
CC 11 Suspension of works
CC 12 Additional work (to other parts of the works) arising from repairs or defects
CC 13 Investigation of alleged defects
CC 18 Other reasons
CC 18A+ Delay caused by additional/unforeseen building ordinance office procedures and
late issue of consent
CC 19 Variations
CC minor To incorporate categories where claims were relatively `minor'
TC 1 Inclement weather
TC 4 Variation order
TC 5 Substantial increase in quantity of any work item not resulting from a variation
TC 6 Delayed possession of site
Table A3 Classifications of common construction conflicts, claims and disputes, as derived from a cross-
section of the literature
Hewitt (1991) General Six main types (categories) of claims: change of scope;
changed conditions; delay; disruption; acceleration; and
termination.
Semple et al. (1994) 24 projects in Six contract clauses commonly cited in claims. Six common
Western Canada categories of disputed claims: premium time; equipment
costs; financing costs; loss of revenue; loss of productivity;
and site overhead. Four common causes of claims:
acceleration; restricted access; weather/cold; and increase
in scope.
Conlin et al. (1996) 483 dispute events Six broad groups of causes of conflict: payment and budget;
on 21 projects in performance; delay and time; negligence; quality: and
the UK administration.
Watts & Scrivener 72 judgments from 59 categories of disputes and 117 `sources' of disputes.
(1992) 56 construction Most frequent sources include, for example, claims arising
litigation cases in from: variations; negligence in tort; and delays including
Australia damages.
Heath et al. (1994) Survey of 28 Five main categories (types) of claims: extension of time;
quantity surveyors, variations in quantities; variations in specifications; drawing
and five case changes; others. Seven main types of disputes: contract
studies in the UK terms; payments; variations; extensions of time;
nomination; re-nomination; and availability of information.
Bristow & Ontario, Canada Five primary causes of claims: unrealistic expectations by
Vasilopoulous the parties; ambiguous contract documents; poor
(1995) communications between project participants; lack of team
spirit among participants; and a failure of participants to deal
promptly with changes and unexpected conditions.
Rhys Jones (1994) General survey of Ten factors in the development of disputes: poor
construction management; adversarial culture; poor communications;
industry and inadequate design; economic environment; unrealistic
lawyers tendering; influence of lawyers; unrealistic client
expectations; inadequate contract drafting; and poor
workmanship.
Diekmann & 427 claims on 22 Most common causes of contract claims (46%) were
Nelson (1985) (federally `design errors' and another 26% were `discretionary or
administered) mandatory changes'. Other specific claims types
projects in USA (entitlement issues) included: differing site conditions;
weather; strikes; and value engineering.
Sykes (1996) General Two major groups of claims and disputes: claim reasons
arising from misunderstandings ± with eight specific
reasons/examples; and claim reasons arising from
unpredictability ± with 17 specific reasons/examples.