This report examines the underlying causes of disputes in construction and the practices used to identify and resolve them before they become formal claims. Transit agencies in the United States and Canada with construction programs during the last 5 years were asked to answer a detailed questionnaire concerning their experiences. The responding agencies represent $10.5 billion of construction investment during this period. The majority of agencies (52 percent) reported that the trend of cost growth from disputes and claims remained constant while the rest of the agencies were evenly split between an increasing trend and a decreasing trend. Agencies reported that they experienced an average cost growth of seven percent of contract value from settlement of disputes and claims for heavy civil contracts, with responses varying from a high of 20 percent to a low of 2.2 percent. A number of studies have examined the underlying causes of claims and disputes and concluded that deficiencies in contract documents typically account for half of all problems and site conditions account for 20 percent. Site conditions have a higher dollar value of settlement, representing 35 percent of settlement dollars. Transit agencies should expect greater site condition problems because of the nature of the contract work when compared with the general construction industry, which involves more vertical work. The legal jurisdiction of construction contracts, including contracts with federal funding participation, is state law. However, one federal court has recently applied federal case law rather than state case law, when federal funds were involved. Also, federal case law precedent is typically followed by state jurisdictions if the contract clause in dispute follows federal wording and there is no state case law precedent. Two recent developments in establishing the construction time of contracts have proven effective in reducing the contract specified duration and in further reducing the achieved construction duration. These techniques are called the A plus B method and the incentive/disincentive method of bidding contract time. These practices have been especially effective with repair, rehabilitation, and replacement contracts. An effort has been initiated by the professionals involved in underground construction to reduce or manage disputes involving geotechnical matters. Three techniques are involved in the effort. The first is to provide in the bid documents the engineer's appraisal of tile likely ground conditions anticipated. This document is currently referred to as the Geotechnical Design Summary Report to be superseded by the Geotechnical Baseline Report. The second technique is the escrowing of the contractor's bid documents; and the third is the creation of a Dispute Review Board (DRB) to bear disputes relatively contemporaneously with construction and to submit nonbinding findings, which it is hoped, would be adopted by both parties, settling the dispute. Transit agencies with underground projects have adopted these practices except where stopped by pressure from contractors opposed to the escrowing of bid documents. The use of DRBs is also spreading fairly rapidly outside of underground construction as reports of the success of this technique spread. Transit agencies have also adopted a number of industry techniques to prevent disputes by improving the quality of the design documents. A high percentage of agencies require their design organization to establish and use a quality assurance program during the design of transit projects. No pattern emerged as to how the design is accomplished whether by in-house resources, the use of an engineering management consultant, or by separately awarded design contracts. Agencies appear to use varying combinations of the three techniques. The majority of transit agencies also use three additional techniques during design to reduce overall program cost. These are design reviews during design, value engineering studies and constructibility reviews. Analyses of cost/benefit ratios of these techniques all show a 10 to I or better return on investments. Agencies not currently using these practices are strongly advised to consider them. Analysis of dispute avoidance during construction shows that the people involved in the project delivery have the greatest impact on the success of a particular project with regard to avoiding disputes. Team building and partnering and, to a limited extent, DRBs are approaches to successful project delivery through enhanced cooperation. Partnering is being carried out by a number of transit agencies. Transit agencies have also widely adopted a number of techniques in general industry use for early recognition and resolution of problems, including requiring comprehensive construction schedules with regular updates, proactive negotiations, and review of project documentation. These and other techniques are all widely and aggressively used by transit agencies. The one area in which transit significantly lags construction industry management is the distribution of authority to settle disputes to field staff. This may be explained by the central location of transit project staff with headquarters staff contrasted with industries whose project staff are distributed over wide geographic regions. This is reflected in the dispute avoidance and early resolution training or lack thereof, of field personnel. Only 50 percent of transit agencies report the use of training in their practices of disputes and claims management. Another area that seems to warrant improvement is the formal or informal practice of many transit agencies to wait until project completion to address disputes. Studies indicate that this practice can lead to higher contractor recovery than prompt resolution. In conclusion, transit agencies devote considerable efforts to both prevent and minimize dispute growth into formal claims and litigation. Transit agencies have also implemented a number of additional techniques to minimize disputes and claims. Based on industry studies, these practices will save project cost growth and enhance the quality of project delivery. (A)
Abstract