How to Keep Construction Disputes from Taking Over Your Construction Project
In a perfect world, construction disputes would never happen. Everyone would agree, work would always stay within budget, and every project would be completed on time.
Of course, we don’t live in a perfect world, which is why contracts are necessary and mediators have jobs.
A successful construction project requires many people with different roles, backgrounds, and priorities working together to arrive on schedule and within budget. Disputes can occur in these areas because of cost overruns and construction delays. Some conflicts, if addressed directly and comprehensively, can be resolved quickly. However, every dispute has the potential to intensify swiftly and cause significant delays. Knowing how to prevent disputes from occurring, as well as taking decisive action once they do occur, is a vital job function for any contractor or owner.
Make Sure The Construction Contract Is Clearly Written
Almost all construction disputes originate from disagreements stemming from the contract. Thus, many disagreements can be prevented by carefully reviewing the contract terms and identifying sections that are not completely clear. Areas that seem open to interpretation or appear overly complex need to be addressed prior to the start of work. These preconstruction discussions, clarifications and agreements should be documented in writing so there is a clear understanding of the contract terms.
Create a Comprehensive Project Plan
The quality and comprehensiveness of a contractor’s preconstruction work is also an important component of dispute prevention. Responsibilities such as providing accurate estimates, concise design and construction documents, establishing realistic delivery schedules, engaging and vetting reputable subcontractors, and assuring the on-time delivery of all necessary project materials set a strong foundation for the subsequent construction. Creating a detailed project plan will help contractors make sure all necessary steps have been sufficiently considered before the work begins.
Identify the Risks
Identifying the risks in each stage of the project plan can also help in avoiding issues later. Drawing from prior experience as to how other disputes began can help the parties anticipate problems and reveal the best way to prevent issues before. A lot of time disputes revolve around finishes. Does the owner expect top grade flooring or standard grade finishes.
Common Conflicts During Projects
Even with every precaution, disagreements may still happen. Common types of construction project claims include:
• The project owner makes a claim against the contractor for excessive delay, cost overruns or unsatisfactory workmanship.
• The project owner cites a claim against perceived design deficiencies or improper project supervision.
• The contractor makes a claim against the project owner for delay or a major change to the scope of work.
• A professional consultant, like an architect, or the contractor files a claim of lien against the project owner for non-payment.
Alternative Dispute Resolution Clauses
When claims lead to disputes, Alternative Dispute Resolution (ADR) strategies can help get the project back on track without expensive and time-consuming legal proceedings. The following ADR clauses are the most common in Florida. Typically, the costs for the services are a shared expense between the contractor and the project owner unless special circumstances exist.
- A Mediation Clause stipulates that a neutral third party will be appointed to facilitate the resolution of the dispute in a non-legally binding manner. Due to the specialized knowledge that may be necessary to mediate construction disputes, an expert determination clause may be necessary. This would come into effect when the dispute is a question of worth or value and requires the services of an appraiser with specialized industry knowledge. Usually, an arbitration provision will state that the parties shall endeavor to resolve their claim, dispute, or disagreement, by mediation in accordance with the Construction Industry Mediation Rules of the American Arbitration Association (“AAA”) currently in effect.
- An Arbitration Clause establishes the groundwork if the parties decide to undergo the arbitration process. A neutral third-party arbitrator is retained to resolve the points in question. The arbitrator is authorized to make a decision that may be viewed as a win for one of the parties and a loss for the other. Settlements can be binding or non-binding arbitrations, depending on the location of where the action takes place.
Formal litigation within the court system is still needed at times. Rulings are legally binding and enforceable, although the decisions may be challenged in appellate court.
What Is A Surety Bond And How Do They Work In Construction Disputes?
A surety bond is a promise by a surety company to pay the owner money if the contractor fails to meet some obligation, such as fulfilling the terms of the construction agreement. Basically, the surety bond protects the owner against losses resulting from the general contractor’s failure to finish the project.
So, how do surety bonds work when it comes to a construction dispute?
When disagreements arise between a contractor and a customer, and they cannot settle the issue themselves, surety companies can get involved to mediate the dispute and attempt to find a resolution that works for everyone. In the event the customer is unsatisfied and files a valid claim for a loss, the customer will receive compensation from the surety company and the contractor will be required to pay it back.
The easiest construction dispute to resolve is the one that never comes to fruition. Even the most contentious disputes begin as differences of opinion. Addressing the issue quickly and thoroughly with open communication and clear expectations, may prevent disagreements from becoming formal disputes. Having a step-by-step plan in place to address disputes when they occur may also help the project move forward as planned.
If you’re looking for a contractor who has experience working on commercial renovation projects, then reach out to RCA Contractors to learn how we can make your vision a reality. We take the time to set expectations with our clients so that both parties are always on the same page when it comes to meeting their expectations and avoiding a construction dispute.