Sie sind auf Seite 1von 37

George Washington University Lecture Series

Contract Disputes in Project Management and How they are Resolved

time Matters
The George Washington University
Lecture Series

Contract Disputes in Project Management and How they are


Resolved

Presented by

J. Kimon Yiasemides, Esq., PMP


Senior Consultant, Warner Construction Consultants, Inc.
Dispute Humor

3
Dispute Humor

How the Architect How Estimating


Designed It : Bid It :

What the Owner


Wanted :

How the Shop


How the Field
Fabricated it :
Installed it:

4
Employment Disputes (perhaps for another speaker)
SEE: EEOC

5
Lecture Overview:
I. Dispute Management through Contracts
II. Change Clauses and Claims
III. Disputes Arising in the Context of Scheduling
IV. Forms of Dispute Resolution

6
I. Dispute Management Through Contracts

A. Bidding
B. Contract Formation
C. Project Execution

7
I. Dispute Management Through Contracts
A. Bidding Issues
– Client Issues
• Owner, Designer Issues
• Clearly Defined Scope? (number one source of disputes)
– Subcontractor Issues
• Un-level playing field among bidders
– Private Commercial Projects
• Flexible process, discretionary
– Public: Federal, State or Local Government
• Complex Statutory regulations
– CFR = Code of Federal Regulations is the “codification of the general
and permanent rules published in the Federal Register by the executive
departments and agencies of the Federal Government.”
– FAR = Federal Acquisition Regulations (Title 48 of CFR)
– Other agency specific regulations
8
I. Dispute Management Through Contracts

A. Bidding Management
ƒ Manage by Formalizing the Process
– Create even playing field
• Same Bonding (limits, type: performance and payment)
• Process for correction of bid mistakes
• Reduce Subjectivity
– Use of numeric winner (rate contractors on a scale)
• Scope Clarified – what is ordinary course of business
– Pre-bid conference to ensure communication of
expectations (remember the tree analogy)

9
I. Dispute Management Through Contracts

B. Contract Formation Issues


ƒ Failure to:
– Identify Scope issues
• Match bid?
• Adequately described?
• Timing of performance adequately addressed?
– Duties of performance, roles defined
– Rights and Remedies described
– Warranties Provided

10
I. Dispute Management Through Contracts

B. Contract Formation Management


ƒ Standardized Contract forms for Construction
– AIA: American Institute of Architects
– AGC: Associated General Contractors
– DBIA: Design Build Institute of America
– Federal forms (ACE, GSA, GAO)

11
I. Dispute Management Through Contracts

B. Contract Formation Management


ƒ Reduce Clauses that Cause Disputes
ƒ Clarify Clauses that Address Disputes

12
I. Dispute Management Through Contracts

B. Contract Formation
ƒ Clauses that cause disputes
– Add vagueness to scope
• Ex: Miscellaneous Metals
– Add subjectivity to performance completion
• Ex: words like, “to the satisfaction of the Owner”
– Create non-typical roles
• OFCI: Owner furnished, contractor installed

13
I. Dispute Management Through Contracts

B. Contract Formation
ƒ Clauses that address disputes
– Changes Clauses
• Owner/Client initiated changes
• Change Directives
• Requests for Change Orders (differing site conditions, etc.)
– Dispute Resolution Clauses
• Mandatory Arbitration Clauses
• Choice of Venue or Choice of Law Clauses
– Other Rights/Responsibilities Clauses
• Termination
• Claim notice provisions

14
I. Dispute Management Through Contracts

C. Project Execution / Performance

15
I. Dispute Management Through Contracts

C. Project Execution Issues


ƒ Design Alterations Due to Conflicts in the Plans
ƒ Formal Scope Increases
ƒ Informal Scope Creep
– a.k.a. Constructive Changes
ƒ Delays to Project Schedule
ƒ Suspension of the Work

• MANAGEMENT TIP = STICK TO THE CONTRACT

16
II. Change Clauses and Claims

ƒ Understanding Changes Clauses in the Contract


– Commonly missed contract clauses include:
• Notice issues
• Rights to Delay damages
• Claim Perfection;
– Specific Timing and Notice Requirements, Waivers, Certifications
• Definition of Force Majeure
– (may vary from expected/normal definition)

17
II. Change Clauses and Claims

ƒ Understanding Changes Clauses in the Contract


– Determine what is Compensable (re: delay damages)
• Compensable delays include:
– Formal Changes or Differing Site Conditions
– Suspension of the Work
• Non Compensable but Excusable:
– “Acts of God” or “Force Majeure”
• Non Compensable and non excusable:
– Contractor caused or Subcontractor caused

18
II. Change Clauses and Claims

ƒ Claim v. Change
A change is an event or action by a party modifying the scope, timing,
or cost of the work from what was contracted. It may also be a change
to the conditions by which the work is performed, or a failure to meet a
contractual obligation. Changes may be compensable or non-
compensable.

A claim is a request for monetary compensation, time, or other


adjustment of the contract terms due to a change, a series of changes,
or a specific action or inaction by a party to the contract that modifies
conditions under which the contract was being performed. A claim
may be resolved through the change management process (typically
called a change order), or may be resolved outside of that process.
Federal Contracts and others may distinctly define a claim apart from
changes handled in the course of the contract performance. Often
these are referred to as a Request for Equitable Adjustment (REA).

19
II. Change Clauses and Claims

ƒ Understanding Legal Rights to a Claim


– Typically Need:
• Prove Entitlement (contract provision or law)
• Causation (answer the “how” question)
• Quantify Damages
– Understand the contracted method of dispute resolution
(may be statutory)
• Mediation clauses
• Arbitration clauses (enforceability issues)
• Mechanics Lien and Miller Act options
• Others (timing, etc.)
– Special considerations:
• No-damages-for delay, Liquidated Damages, and Common-law
duties (such as non-interference with the work)
20
III. Disputes Arising in the Context of
Scheduling
Analysis

21
III. Disputes Arising in the Context of
Scheduling
ƒ AIA Document A201, General Conditions of the Contract
for Construction
4.3.8 Claims for Additional Time

4.3.8.1 If the Contractor wishes to make Claim for an increase in the


Contract Time, written notice as provided herein shall be given. The
Contractor’s Claim shall include an estimate of cost and of probable
effect of delay on progress of the Work. In the case of a continuing
delay only one Claim is necessary.

4.3.8.2 If adverse weather conditions are the basis for a Claim for
additional time, such Claim shall be documented by data
substantiating that weather conditions were abnormal for the period of
time and could not have been reasonably anticipated, and that weather
conditions had an adverse effect on the scheduled construction.

22
III. Disputes Arising in the Context of
Scheduling

ƒ Simply put:

Delay
• Project does not complete as planned

or

Acceleration
• Project completes faster than planned

23
III. Disputes Arising in the Context of
Scheduling

ƒ Delay areas of dispute


– Causation
– Duration
– Damages resulting

ƒ Acceleration areas of dispute


– Same as above, with a twist
• Causation may come from a failure to extend Project deadline,
not just directed acceleration (constructive acceleration)

24
III. Disputes Arising in the Context of
Scheduling

Examples of Types of Analysis/Methodologies:


ƒ Time Impact Analysis
ƒ Total Time
ƒ But For
ƒ Impacted As-Planned
ƒ Collapsed As-Built
ƒ As-Planned As-Built Comparison

25
IV. Forms of Dispute Resolution

A. Negotiation
B. Mediation
v. Arbitration
C. Litigation

26
IV. Forms of Dispute Resolution
A. Negotiation and Settlement Tactics
ƒ Negotiation lives through all stages of a dispute
– Begin before formal negotiation sessions
ƒ Determine goals from the onset
– Stick to objective goals
ƒ How much are you able to concede
– Find the reasonable range of each issue before beginning the
negotiation
ƒ Determine opposition’s positions, weaknesses, and
possible goals
– What are the resources of the opposition
– What is the knowledge base (do they need to be educated as to
certain details before they can make an informed decision)

27
IV. Forms of Dispute Resolution

A. Negotiation and Settlement Tactics


ƒ Determine how the negotiation is to be facilitated
– Neutral territory may be needed
– If 3rd party facilitator necessary then perhaps Mediation is more
appropriate
– Rules of engagement / confidentiality

28
IV. Forms of Dispute Resolution

A. Negotiation and Settlement Tactics


ƒ Bring the right team to the negotiation
– Decision makers present or not?
– Lawyer as your spokesperson has advantages and disadvantages –
pre-determine his/her role
– Timing of when the Expert’s findings become revealed

ƒ When to settle and when to continue pursuing


– What are limiting factors such as: time, cost of pursuing, political
limitations, and other resource considerations
– Can the limiting factors be quantified
– Settlement when negotiation leverage is highest

29
IV. Forms of Dispute Resolution

B. Mediation and Arbitration


ƒ Two most broadly used forms of Alternative Dispute
Resolution (ADR) forms in Construction claims dispute
resolution: Mediation and Arbitration
– Both may have state laws covering:
• Confidentiality
• When is an Arbiter decision or mediation agreement binding
– Both tend to be less costly than a trial, in both monetary and
political cost
– Both tend to take less time than a trial
– Construction disputes tend to be fact-centered rather than legal or
morally centered; thus ADR is a good venue

30
IV. Forms of Dispute Resolution

B. Mediation and Arbitration


ƒ Mediation – should almost always be used
– Advantages
• Parties participation can result in a more accepted outcome
• More of the underlying issues come out
• Varying styles provides flexibility; from shuttle diplomacy to
facilitative style mediation.
• Easier to communicate the arguments of the case
• Either a more elaborate/in-depth or simplified presentation
depending on parties desire
• A preview of what is to come at trial
• Potential for settlement; if not during the mediation then a
more informed settlement prior to trial
• Buy-in from the parties more likely than arms length
negotiation through lawyers
• Parties maintain some control over their destiny
31
IV. Forms of Dispute Resolution

B. Mediation and Arbitration


ƒ Mediation
– Disadvantages
• Very few situations when better to not mediate: perhaps if
weak on facts, heavy on legal issues, and absolutely no chance
of reconciliation (rare).
• Bad mediator can be a waste of time. Choose mediator
carefully, be sure that his/her style is the appropriate one for
the case at hand, and they have a background in construction
or appropriate industry.

32
IV. Forms of Dispute Resolution

B. Mediation and Arbitration


ƒ Arbitration Tip
– Check enforceability of Arbitration clause; some States are
specific about wording, timing, waiver, etc.
• Typically Arbitration is binding unless otherwise stated
• Uniform Arbitration Act adopted by some States
• Requires filings such as a Demand, and potentially witness
statements

33
IV. Forms of Dispute Resolution

B. Mediation and Arbitration


ƒ Arbitration Advantages:
– Non-binding
• Use like a mini-trial.
• Provides potential view of trial outcome
– Binding
• Cheaper/faster than litigation
• May be required by Contract
• Ease of evidentiary rules
• Parties may chose industry specific educated arbiter (the right arbiter
makes a big difference in outcome)
• More likely to have an equitable ruling than in litigation
• Not a public forum; use of confidentiality forms

34
IV. Forms of Dispute Resolution

C. Litigation
ƒ Why go to trial
– Parties unable to negotiate settlement
– One party for political or economic reasons is unable to settle
– Legal issue that creates an impasse in negotiations
– Neither party is convinced of the other’s facts

35
IV. Forms of Dispute Resolution

C. Litigation
ƒ Advantages
– Provides an enforceable judgment
• Caveat: Appeals
– Can attach property as part of enforcement

ƒ Disadvantages
– Parties loss of control over outcome
• Both parties may “loose”
• Blame for a loosing outcome
• Uninformed judge or jury may not provided equitable solution
• b) Cost of trial
• c) Public forum
• d) Difficulty in presenting fact heavy / evidentiary slim cases

36
QUESTIONS?

George Washington University Lecture Series


Contract Disputes in Project Management and How they are Resolved

time Matters

Das könnte Ihnen auch gefallen