Construction Claims and Disputes. Methods available to resolve these claims and disputes in the UK construction industry
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The discussion in this report involves the evaluation of construction claims and disputes. The matters that surround the construction industry will be evaluated where the main issue of discussion will be the disputes that crop up. The discussion will also show how these disputes arise and the various parties who are involved in the same. The repercussions of these disputes towards the involved parties will be considered so as to establish the extent of damage caused at the end. The other issue of discussion will be the methods that are used to solve the disputes arising from the construction sector in order to ensure that the parties concerned are fairly treated without any form of discrimination. The report also aims at using various data collection methods in order to determine the expected results concerning the parties involved in the disputes concerning the construction issues at the various aspects. The results of these methods will be discussed so as to determine how the same can be used in improving the ways of dealing with the disputes arising in the construction sector. The recommendations that can be made in the law involving the handling of issues in this sector of the industry will also be examined in details.
CHAPTER ONE: INTRODUCTION 1.1 Context of proposed line of investigation The area of investigation and discussion in this report involves claims and disputes that arise in the field of construction in the UK and in Nigeria. Disputes involve the misunderstandings that arise between the parties involved in a certain activity. They may be caused by non-alignment of the interests of the two parties where one of them feels dissatisfied due to actions of the other party. In the UK, the construction industry has been in existence for a long period of time. The discussion on this topic was mostly influenced due to the insufficient and unclear guidelines on how the disputes in the construction sector are supposed to be solved and therefore making it hard for the aggrieved party to have justice on time. 1.2 Background The construction industry in the UK is usually regarded as one with high cases of claims and conflicts raised by the parties involved in the activities. In addition, it has the highest numbers of claims made per any given year. In the making of contracts concerning the construction work in the UK, the various parties enter into litigation where they vow to be bound by the rules that ensure that every party is satisfied at the end of the work. After litigation has been made among the parties on how the construction work should be done, some parties do not play their part, breaching the contract made at the beginning of the work. It was reported by the UK government that in the year 2015 then disputes arising from the construction field had reduced by 12% as compared to the previous years (Santry, 2016). This meant that there was increased observance to the established rules and regulations by the construction Act of the country. The same happens to the construction industry in Nigeria, where the sector is involved in disputes in the industry, which are caused by the delays brought about by the lack of understanding between the people involved in a contract. Conflicts and disputes in the construction industry in Nigeria are characterized by tension among the parties due to breach of the contract terms and therefore derailing the project work in progress.
1.3 Proposed contribution to knowledge Khekale & Futane (2013, p.848) explained that the industry of construction industry is usually complex in nature and is also competitive when taking into consideration the parties involved in the same. They explained that the field is very diverse due to the various construction works that takes place in the field and therefore making it hard to solve the conflicts arising due to the many activities that take place. Gould (2004) explained the need to come up with methods of solving the disputes in the construction industry as he noted that the cases were increasing at an alarming rate in the UK. He discussed the techniques for dispute resolution so as to cater for the increasing number of claims brought about by the parties. In his research, Gould (2004, p. 12) explained the Alternative Dispute Resolution (ADR) methods that are involved in the settling of the disputes that arise as a result of the claims and conflicts that crop up from the construction work that takes place.
CHAPTER TWO: LITERATURE REVIEW2.1 Theoretical Framework Theoretical frameworks of the research work done previously in the field of construction will be the subjects of discussion. The theories that have been researched on previous researchers will be the main point of focus. As time passes by, the construction industry is likely to increase in size, which will result to more challenges in the construction projects involved in the UK. More conflicts in the sector may rise due to increased demand for high quality projects being designed and also the completion of the same within the stated period of time. Due to the conditions that have to be met by the contractors before commencing construction work, this may lead to delays in the implementation of the work within the stipulated period of time, which may result to disputes between the contractors and the project owners. This part of the discussion examines the contributions of the various authors towards this topic and the ways in which their research helped in improving the state of the construction industry. The study of their research will enable the researcher to come up with a solid discussion on the field of construction so as to help improve the general state of the sector involved. The discussion comprises of the theoretical framework and the critical literature of the previous research done in the construction industry and also the literature review summary.
2.2 Seminal papers and previous studies Construction Disputes This is an issue that is prevalent in the construction industry and has been in the UK since construction was initiated in the country. This issue has been at the heart of discussion by the authorities in the country so as to determine how there can be smoothen the running of the sector for better performance. In his discussion, Yates (2002, p. 223) explains that disputes in the construction industry are bound to exist for long periods of time due to the changes in the patterns of doing construction work by the existing contractors. He explained that one of the factors that lead to the eruption of the disputes is contractual incompleteness. He stated that this factor leads to the eruption of the disputes as a result of the non-completion of the construction work within the agreed time between the owner of the project and the contractor. This may be caused by the unavoidable circumstances such as delay in the delivery of the construction materials that is beyond the control of the contractor. He further explained that this might make the owner of the project feel that the contract terms have been breached and therefore a likely eruption of the disputes in this field of construction. According to Yates (2002, p. 232), opportunism on the side of the contractor may also cause disputes. In his explanation, a contractor who is undertaking a certain project from one client may go ahead and secure contracts from other clients. This may reduce the loyalty of the contractor towards the client at hand and therefore making it hard for the work of the first client to be completed within the expected period. The owner of the first project may feel offended, and therefore resulting in construction disputes. Building Law and Regulation The UK construction and building industry is governed by strict regulations stated out by the government and have been in application for over 150 years. In his explanation, Griffin (2008, p. 242) explained that the latest regulations in the construction industry in the UK were rewritten and revised and compiled in the Building Regulations 2010. The regulations usually state out that before initiation of any construction work there have to be acquisition of the necessary authorization to certify that the area of construction is safe and that the contractor is competent to carry out the work. This will help in ensuring that there is safety of all the parties involved in the construction work through reduction of the risks that may be prevalent if the work was done by incompetent contractor and if the site is not safe. The UK government ensures that there is strict control of these regulations by the parties involved and therefore making an assurance that the construction work done will be of high quality through meetings of the set standards. Griffin (2008, p.245) explains that the local government in the UK is responsible for making follow ups to ensure that the construction laws and regulations have been met by the contractor in his work. The UK government has outlined the repercussions that befall any of the parties involved in the construction work that breaches any of the construction regulations stated by the Construction Act of UK. 2.3 Critical Review of the Literature According to the report by Allen (2015, p.8), the construction industry in UK has been on the rise since the year 2010 and this has also impacted the increase in the dispute cases in this sector of the industry. He explained that the main causes of the disputes in the construction industry between the years 2013 and 2014 were due to failure to administer the contracts properly by the relevant authorities. This led to the production of substandard construction projects being done by the contactors. The other reason that contributed to most of the disputes in UK is as a result of the contractors or employees failing to make a clear understanding of the obligations stated in the contract. This may lead to the objective expected to be achieved at the final work of the project not be accomplished and therefore leading to dispute. In the discussion of Allen (2015, p.8) report, increase in the disputes in the construction industry has led to reduction of the contribution of the sector towards the country’s GDP as the clients fear undertaking new construction projects due to fear of uncertainties in the field. However, the UK government is doing a lot to ensure that there is stability in the construction industry so as to ensure that the quality of projects undertaken is high and that any party does not compromise it at any cost.
Chapter 3: RESEARCH AIM AND OBJECTIVES3.1 Overall aim of the study The main aim of this study is to have a clear definition of what takes place in the construction industry. This entails the rules governing the construction work where the regulations and guidelines that have to be followed in order to ensure that the final work is of the desired quality. The research also aims at discussing the disputes that arise in the cause of doing construction work. The discussion comprises of the causes of these disputes as well as the ways in which is they are solved so as to ensure that the industry operates in a smooth way. The alternative methods of dispute resolution involve the objectives aimed at being achieved in this research. The research aims at analysing the construction industry in both UK and Nigeria so as to have a clear understanding of the field. The methods of settling disputes in both Nigeria and the UK construction industries are diverse in that they help in bringing calmness to the parties involved and reduce the issue of delays in the project work. The first method that is commonly used in the settlement of disputes in the two countries is mediation. This involves appointment of a third party referred to as a mediator to help in bringing the conflicting parties together. The parties are given a chance to express their issues and then the mediator settles the concerns of each party in a peaceful manner so as to help in the reduction of delays caused by the disputes. The other method is adjudication. This method also involves a third party who settles the conflicts and disputes in the construction industry. The decision of the adjudicator is usually termed to be final and therefore enabling the project work resume as usual. Another method of dispute resolution in the construction industry is litigation. This method involves settling of the disputes through the use of court system and therefore reducing the issue of delays caused by the violation of the terms of the contract by one of the members of parties in a contract. The other method of dispute resolution in the construction industry in Nigeria and the UK is arbitration. This method involves mutual agreement of both the conflicting parties in a contract to settle the dispute through use of a neutral person referred to as the arbitrator. The arbitrator usually determines the case after listening to the material facts of the two parties before determining the final verdict. The final verdict given by the arbitrator has to be followed by all the parties involved in the dispute and follow the directions given. This helps in ensuring that the construction delay of the project continues for the good of both parties involved in a construction contract (Black’s Law Dictionary, 2004). 3.2 Objectives of the study 3.2.1 Definition of the term Delayed Claims and Disputes According to Black’s Law Dictionary (2004), a claim refers to a request for a remedy to be taken upon by the relevant authority concerned with a certain situation. It may comprise request for a payment, correction of the construction defect and any other factor. Delayed claims in construction refer to the requests that are made by the clients to the contractors of a certain project due to the non-completion of the projects within the stipulated period of time. According to Black’s Law Dictionary (2004) dispute in construction refers to the disagreement that may arise between the parties involved in a construction project. This may arise due to carrying out of the project in a way that is not in line with the outlined terms of the contract stated at the beginning of the project. 3.2.2 Major causes of delay claims and dispute in the industry in the UK and Nigeria According to Teixeira & Pires (2007), the first cause of the delays in the construction industry as outlined in this report is the problem that leads to shortages on the part of the industrial infrastructure. The research further explains that the cause of the shortage in terms of infrastructure is brought about by inconsistence in the provision of the supply of resources required for the construction process. When the delays of this kind happens, there is a likelihood of the eruption of the disputes from the side of the owners of the projects as they feel that the contract terms have not been adhered to (Yiu & Cheung (2006, p. 442). According to Teixeira & Pires (2007) the other cause of the delay is the problems brought about by the consultants and the clients. This problem arises when the clients specify an extra requirement that is supposed to be included in the project during its implementation and which had not been included in the initial design of the project. This may result in the inconvenience of the contractor as he will be forced to redraw the blueprint of the plan and therefore leading to delays in the time for the completion of the project. According to Teixeira & Pires (2007) construction delays are caused incompetence on the side of the contractors. This may lead to a situation where the project is not undertaken in accordance with the required standards set by the authority in charge. A research done by Brooker (2002) showed that another reason as to why there is an eruption of the disputes and claims in the construction industry is due to professional negligence. This is likely to lead to disputes arising due to non-compliance with the terms of the contract. 3.2.3 Effects of claims and disputes on projects in UK and Nigeria In accordance to the research by Chitkara (2009, p.132) the first result of claims and dispute in the construction industry is time overrun. This refers to a situation where the completion of the project is done at a later date than the one established in the contract. This may be contributed by the delay factors such as late payments or even payment disputes between the owners of the project and the contractors carrying out the construction work Chitkara(2009, p.132). A research by Owolabi, et al. (2014, p.205) explains that the effects of claims and disputes in the construction industry is the wastage and under-utilization of the resources allocated together with the man-power. These resources are usually wasted because the time allocated for the project initially is not met and that more of it has been unproductive therefore making the service providers be on the losing end (Owolabi, et al.( 2014, p.205). 3.2.4 Compare and contrast main laws relating to construction delays in UK & Nigeria In the U.K, the first law under consideration is the Delay & Disruption Protocol that was published by the Society of Construction Law to act as the guideline for the delays that may occur in the industry. It was established in order to offer solutions to the disputes due to the high number of delay-related cases. The Construction Regulations 2015, also seeks to protect the owner of the project from any negativity that may arise from the delay caused by the contractor. The law ensures a client placing a dispute is compensated for accordingly. In Nigeria, the construction delay law under considerations Defect Liability Period. This law explains that the owner of the project should retain a sum equal to 5% of the total compensation from a project so as to assess the quality of the work done MOHAMMED & ISAH(2012, p.781. This usually applies to any form of deduction that the owner may want to make concerning the work of the contractor due to the inconveniences caused in regards to delays in accordance with the terms of the contract MOHAMMED & ISAH(2012, p.786). Arbitration and Conciliation Act also governs the construction work in the country in regards to disputes erupting from the delays. The law gives the guidelines on how the disputes should be resolved to ensure that the construction work continues as expected (MOHAMMED & ISAH(2012, p.786). 3.2.5 Construction Contracts in UK & NigeriaThe following are the contracts in the U.K Design and Build Contract (DB). This contract states that the contractor who has won the construction project should carry out the whole process of design as well as implementation of the building work. The liability of the contractor in this case mostly lies on the side of designing the project at hand. Repair and maintenance contract (RM) This contract involves individual projects where the program for the repair of specified buildings is stated out clearly (Aibinu & Jagboro, 2002, p.540). This type of contract is usually associated with small and medium-sized contracts and is usually carried out by individuals or local authorities in the UK. Management contract (MC). This involves a construction contract, which oversees and provides guidelines of running the project to the contractor who has won the contract (Aibinu & Jagboro, 2002, p.540). The following are the contracts applied in Nigeria Lump sum contracts This contract is a constructor’s agreement to undertake a specified type of project with some fixed amount of reward at the end (Chitkara, 2009, p.53). These contracts are usually inflexible in terms of price to be paid and therefore easily derailed by economic crisis such as inflation. Cost reimbursement contracts This contract gives the payment guideline. In this contract, a client is supposed to pay the contractor a certain specified amount of money for the work and then an extra amount agreed so that he can make profits at the end. Measurement contracts This type of contract provides the guidelines of the cost of work being determined by the actual costs incurred during the carrying out of the construction work in Nigeria (Chitkara, 2009, p.52).
3.3 Hypotheses Null Hypothesis Ho1: The major causes of disputes and conflicts which result into delay in the construction industries in both Nigeria and the UK do not differ significantly. Null Hypothesis H02: The major causes of disputes and conflict in the construction industry in both Nigeria and the UK differ significantly.
CHAPTER 4: METHODOLOGY The concept of methodology is an important aspect of a proposal as it is helps in the analysis of the data obtained in the field of study. This part of the proposal outlines how research is carried out so as to be able to acquire the relevant information for the achievement of the objectives set at the beginning of the research. 4.1 Research Approach The research approach to be used in this proposal is inductive approach. The research involves inductive approach with the aim of making a brief summary of the whole process of doing research, which could be read through within the shortest time possible. The research of the companies in the construction industry involves inductive approach so as to create a connection between the objectives of the research and the findings obtained after the research is complete. In this case, the cause of the delays and the disputes in the construction industry is the main subject of consideration.
4.2 Sampling plan This comprises of the different units of the samples which will be used by the researcher in carrying out the research in the industry. 4.2.1 Population In this research, the sample population to be used is the construction companies in both UK and Nigeria where important data relating to the research will be taken and recorded. The research will be conducted among a sample of 50 companies in the industry. This large size is selected due to the need for reliable information. The construction companies’ records will be reviewed in order to establish the most important details which would help in coming up with a good research. The best performing companies will be chosen to ensure the right information regarding the industry is obtained (Khekale & Futane, 2013, p.850). 4.2.2 Sampling Method The sampling method to be used is non-probability method. This is because the companies to be selected are heavily dependent on the willingness of the companies to disclose the material facts required. The reason for selecting this sampling method is due to convenience in regards to the cost involved (Brooker, 2002, p.101). 4.3 Data acquisition method The first method to be used in acquiring the data is interviews where the representative of the companies selected will be asked questions related to their past experiences. The reason for using the interviews is so that first-hand information can be obtained from the source to avoid the problem of distorted information. Questionnaires will also be used which involves listing down of questions related to the topic of the research. These questions will be circulated to management teams of the companies to be sampled out. The advantage of using this method of acquiring data is that a lot of time will be saved, as one does not have to be physically present for the questionnaires to be filled by the respondents. In addition, postal surveys will be sent to different individuals to allow them give their opinion concerning their knowledge on the disputes and conflicts that exist in the construction industry. The people to be selected for this survey will be different clients who have had their projects handled by different contractors in industry. These clients will give their view on the subject matter at hand. This method is selected due to its positive feedback in previous researches (Brooker, 2002, p.100). 4.4 Analytical Approach This approach will be used in the interpretation of the information to be acquired during the research so as to help in making of correct inferences required from a research done. 4.4.1 Qualitative Approach Grounded theory This qualitative approach involves the conducting a research with the aim of explaining a theory so as to determine the expected results as stated out in the objectives list. In this case, grounded theory will involve acquiring the right information from the companies so as to come up with a compact project. In this case, memoing will be involved where the most important aspects of the study will be recorded when carrying out of researchField research This is a form of qualitative approach that involves the gathering of the information acquired from the field. In this case, it will involve the acquiring the relevant information that would help in establishing the relationship between the disputes and the delays that take place in the construction industry. This will enable the researcher in making a concrete research involving qualitative approach. Case studies This involves collection of information concerning the subject matter where the relevant data is compiled for further analysis. With regard to this case, there will be an in depth consideration of the company records in order to determine the cases of dispute cases related to delays that have been experienced before during the working schedule of the company. There will be collection of data on specific areas over a certain period of time to ensure that the information is within a certain time frame. This will provide the necessary theoretical information required for the carrying out qualitative research.
Chapter 5: PROJECT PLANNING Project planning involves taking into consideration the strategies that will be employed in ensuring that the project at hand or research being taken is achieved within the desired period of time and taking into consideration other factors. 5.1 TimescalesGantt ChartDate / Event 9/04 16/04 – 22/05 25/04 – 04/06 12/06 -14/06 17/06 (20-25)/06 (2-5)/07 12/07 (15-18)/07 (20-24)/07 (2-15)/08 (20-14)/08Review of the report structure Preparation of proposal budget Initial report writing Contacting companies in UK Evaluation of suitable companies for data collection in UK Carrying out interviews in UK Other data collection methods in UK Evaluation of suitable companies for data collection in Nigeria Sending out interview questionnaire to Nigeria Using other data collection methods in Nigeria Compilation of the whole report of the two countries Final report preparation 5.2 Critical Success Factor5.2.1 Risk Analysis This involves the review of the risks that are likely to be associated with the kind of work that is being undertaken. In this case, the expected risks during the collection of the information include wastage of time during the time of moving from one place to another. This is because some of the companies selected may not be willing to disclose the relevant information required to carry out the research. The other expected risk in this case is inaccurate data being provided by some of the respondents during the research (Yiu & Cheung, 2006, p.830). 5.2.2. Contingency plans This involves planning for the uncertain future where one takes into consideration the risks that may be involved. In this case, the contingency plan will involve planning on how to deal with the future risks that may affect the operations of carrying out the research. The risk of time wastage through travelling from one place to another will be dealt with through making prior contact with the top management of the company before the day of visiting in order to determine the ones who will be willing to cooperate during the research period. This will help in ensuring that there is no time wastage as the researcher moves to different places where he is not certain about the level of cooperation of the respondents (Khekale & Futane, 2013, p.56). The other risk of incorrect information obtained from the questionnaires being used will be avoided through carrying out of the market research of the company under consideration so as to establish the facts concerning the same as well as discovering the truth of the information provided.
ReferencesAibinu, A. A. & Jagboro, G. O., 2002. International Journal of Project Management, Elsevier.. The Effects of Construction Delays on Project Delivery , pp. 533-599.Allen, M., 2015. GLOBAL CONSTRUCTION REPORT 2015. The Higher the Stakes, The Bigger the Risk, pp. 1-19.Black’s Law Dictionary, 2004. Construction Disputes. [Online] Available at: http://www.constructiondisputes-cdrs.com[Accessed 10 May 2017].Brooker, P., 2002. Construction lawyers’ attitudes and experience with ADR. Construction Law Journal, 18(2), pp. 97-116.Chitkara, K. K., 2009. Construction Project management: Scheduling and controlling. Tata: McGraw-Hill.Gould , N., 2004. CONSTRUCTION LAW SEMINAR. INTRODUCTION TO THE BASICS, pp. 1-34.Griffin, J. P., 2008. Appendix D: Construction, England and Wales: The Scheme for Construction Contracts (England and Wales) Regulations 1998. Arbitration Practice in Construction Contracts, pp. 239-250.Khekale, C. & Futane, N., 2013. International Journal of Science and Research. Management of Claims and Disputes in Construction Industry, 4(5), pp. 848-856.MOHAMMED, K. A. & ISAH, A. D., 2012. Interdisciplinary Journal of Contemporary Research in Business. CAUSES OF DELAY IN NIGERIA CONSTRUCTION INDUSTRY , 4(2), pp. 785-794.Owolabi, J. D. et al., 2014. International Journal of Education and Research. CAUSES AND EFFECT OF DELAY ON PR, 2(4), pp. 197-208.Santry, C., 2016. Construction News. [Online] Available at: https://www.constructionnews.co.uk[Accessed 9 May 2017].Sheridan, P., 2003. Claims and disputes in construction. Journal of construction Engineering and Management, 12(1), pp. 3-13.Teixeira, H. P. & Pires, B., 2007. Dealing with cost and time in the Portugees Construction industry. CIB world building congress, Volume 422.Yates, D., 2002. Construction disputes. Reducing the Incidence of Claims and Disputes in Construction Contracts, pp. 221-234.Yiu, K. T. W. & Cheung, S. O., 2006. A catastrophe model of construction conflict behaviour. Building and environment, pp. 438-447.
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