Effective management strategies for construction contract disputes

Abstract

PurposeContract risk management has become a critical mission, as contract issues may lead to a loss of vast amounts of money to parties involved or cause project failure. This study sought to identify effective management strategies to mitigate construction contract issues that might emerge during construction.Design/methodology/approachA quantitative research approach was adopted for the study. Structured questionnaires made up of close-ended questions were distributed to construction professionals in South Africa via the SurveyMonkey platform. The data were then analysed using descriptive statistics.FindingsThe findings indicate that the critical sources of contract-related disputes are ambiguous definitions of the contract parties' scope of their rights and obligations, lack of precise arrangements regarding the calculation of contractual penalties for failure to meet the deadline, lack of detailed specification of the works and specific milestones, lack of provisions regulating changes to the project documentation during the construction stage, an excessive amount of contractual penalties on contractor's side and lack of provisions regarding the rules of performing additional and replacement works and their settlement. However, for these disputes to be effectively managed, strategies such as reduction uncertainties in project's phases, setting up contingency plans, construction guarantee, extension of time claims, payment guarantee, retention and escalation clause should be implemented by the parties involved.Research limitations/implicationsEven though the empirical study focused on construction professionals in South Africa, the findings could be applied to other countries outside of South Africa.Practical implicationsTo effectively manage and prevent contract disputes from averting project failures and losses to parties involved in the contract, construction professionals need to be aware of strategies that must be implemented before and during the project execution. If well implemented, these strategies will help a construction project be successful and experience fewer contractual disputes.Originality/valueThe study has identified the knowledge gap concerning suitable contract risk management strategies available for implementation to effectively prevent any contract parties from losing money, time and project failure.

Construction Contracts Quality Assessment from the Point of View of Contractor and Customer

“…The normalized matrix of the contractor's expert assessment averages is shown in Table 5. The consistency index and the consistency coefficient (CR < 0.1) were determined according to Formulae (7) and (8), with the CR of the customer's experts = 0.0974 and the CR of the contractor's experts = 0.0989.…”

“…Inverse pairwise comparison matrices were constructed, 12 matrices (6 matrices for the customers and 6 matrices for the contractors). The consistency index and the consistency coefficient CR < 0.1 for each matrix were determined according to Formulae (7) and (8).…”

“…Inverse pairwise comparison matrices were constructed, 12 matrices (6 matrices for the customers and 6 matrices for the contractors). The consistency index and the consistency coefficient CR < 0.1 for each matrix were determined according to Formulae (7) and (8). The first criterion, clear procedures to allow changes to the contract in the event of an increase/decrease in the scope of work, was rated the highest by the customer experts in the first contract, and the highest by the contractor experts in the first and the second contract.…”

“…A dispute is further defined as the inability of two parties to agree on a particular technical or management issue, which may lead them to go to court [6]. Conflict involves a breakdown in communication between the contractor and the customer, which can affect the legal relationship and the successful implementation of the construction project [7]. In the construction sector, disputes are a constant topic of conversation.…”

The interaction effect of trust and contract on dispute negotiation strategy: evidence from the Chinese construction industry

“…Empirical studies suggest that different functions of contracts may affect all parties’ behaviors (Lumineau and Malhotra, 2011). There should be a deliberate combination of both contractual control and coordination (Amoah and Nkosazana, 2022). Commonly, construction contracts involve provisions stipulating rights and obligations of the contracting parties, while the adjustment rules are also included (Wang et al , 2018).…”