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Dispute Management, Avoidance and Resolution

Dispute avoidance in the construction industry is an important aspect of effective contracts management, and, whilst Cannonway can provide a comprehensive service should claims and disputes arise, our first priority, where we are involved early in the process, is to seek all means of settling the issues with a view to avoiding disputes, consistent with the requirements of our client.

Partnering has become more popular in recent years as one means of reducing the risk of disputes, and Cannonway can advise on this concept if required. Even if partnering is used, however, it is still necessary for the parties to comply with their contractual obligations, and the need for effective contracts management does not change.

Where disputes do arise it is important that they are managed by experienced and specialist personnel so that actions appropriate to the dispute are taken when required, strategies developed and put in place to meet the client’s objectives, and opportunities for settlement are recognized and developed when they occur.

Cannonway provides this expert consultancy based on its many years of experience in the industry, and works with its clients to achieve the effective management and resolution of construction disputes. The appropriate skills are essential in achieving this objective, including an in-depth understanding of construction, contracts and disputes, knowledge of claim preparation techniques and a detailed understanding of the elements of claims and probable success rates, negotiation techniques, mediation training and when to use mediation, other ADR (alternative dispute resolution) processes such as adjudication, short-form arbitration, expert determination, and mini-trials, in addition to an understanding of arbitration and litigation processes.

Cannonway provides these services for many different types of organizations involved in the construction industry.

Where we work for employers, we have found on many occasions that it is useful and sometimes essential to provide an independent opinion on Engineer’s decisions. This is helpful in determining strengths and weaknesses of the Engineer’s position and enables us in conjunction with the employer to consider means of settling the dispute prior to commencement of formal dispute resolution procedures. This has been successful in a number of instances in settling disputes prior to further proceedings.

Where required, Cannonway staff work closely with solicitors, barristers and in-house counsel to assist in providing a comprehensive, high quality service for the management of construction disputes.

Dispute Resolution Advisors (DRA)

Major construction projects are a high risk business. Delays are common and this can frequently lead to arguments.

For example, in the situation where there is a delay the Employer may believe that the Contractor is responsible for the delays, possibly as advised by its consultants, and seek to recover damages from the Contractor. On the other hand, the Contractor will be incurring substantial additional costs as a result of delays and will seek all opportunities which may be available under the Contract to gain additional time and recover the additional costs which it has incurred. There are also many other issues on constructions projects, such as variations, late information, difficult ground condition, and lack of and increased cost of resources which can cause difficulties and lead to disputes.

As a result of the many disputes which had arisen in Hong Kong on major projects, and which were costly and time consuming to resolve, the Hong Kong Government introduced a system of Dispute Resolution Advisors (DRA) in 1990. This was first introduced by Architectural Services Department as a pilot scheme, and following its success over a number of years, when it was seen that disputes were reduced with the use of DRAs, it has been extended to all government works departments.

The role of the DRA is to work with the parties from the commencement of the contract as a neutral member of the team. The term “Dispute Resolution Advisor” would be more accurately described as “Dispute Avoidance Advisor” as much of the work of the DRA is proactive work to ensure that disputes are avoided. Where problems do arise, the DRA will work between the Employer and the Contractor to ensure as far as possible that matters are resolved and that formal disputes do not arise. If disputes do arise, then the DRA has a final opportunity to resolve these with the parties before formal dispute proceedings commence.

Where the Employer wishes to use a DRA, this is written into the Contract as a Special Condition of Contract. The DRA is generally paid on an hourly basis, and the cost may be shared equally between the Employer and the Contractor. Alternatively, the cost could be paid by the Contractor in which case there is no cost to the Employer.

The role of the DRA does not take very much time unless there are major difficulties on the project. Typically, the DRA will attend monthly site meetings, and discuss any issues each month with the Employer and the Contractor. In many cases this will only take five or six hours each month, and the total cost is therefore an extremely small part of the total project cost. For example, on a HK$500M Contract over two years, the typical cost of the DRA might be around 0.05% of the construction cost. The Hong Kong Government have found that during its lengthy pilot scheme this cost has been an effective investment in minimizing difficulties and ensuring the smoother running of the projects.

Dispute Resolution

Construction projects do not always run true to time and within budget. Ambiguities and/or discrepancies in the contract documents, design changes, unexpected ground conditions, defects, delays to the progress of the works and the like may all give rise to differences of opinion - and disputes.

Common methods of dispute resolution include:

  • Litigation: judicial resolution in the courts where the case and the judges decision become open knowledge.

  • Arbitration: a formal, private process whereby the parties are bound by the decision of a neutral and independent person who is selected by the parties or on the parties' behalf on the basis of the person's expertise, reputation and experience.

  • Alternative dispute resolution: a collective term used to describe methods of resolving disputes which are alternatives to litigation and arbitration and which usually offer a less expensive solution. For example:

    • Mediation: a voluntary, private dispute resolution process in which a neutral person helps the parties to reach a negotiated settlement.

    • Adjudication: a voluntary, private dispute resolution process in which a neutral person makes a decision, which is binding upon the parties, with the right of appeal in arbitration or in the courts.

If disputes arise, Cannonway are able to offer the following expertise and technical knowledge:

  • independent appraisal of the strengths and weaknesses of an employer's and/or a contractor's case;
  • technical advice and assistance throughout the dispute resolution process;
  • preparation of particularised documents including technical position papers, assistance with pleadings, further and better particulars and witness statements;
  • expert witness for quantum, planning and delay analysis or other associated specialist areas.

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