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Journal of Legal Affairs and Dispute Resolution in Engineering and Construction

Journal of Legal Affairs and Dispute Resolution in Engineering and Construction

Archives Papers: 86
The American Society of Civil Engineers
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Premature Construction Start Interruptions: How Awareness Could Prevent Disputes and Litigations
Ryan Griego;Fernanda Leite
Keywords:Premature construction starts;Early mobilization;Dispute resolution;Litigation;Claims;Business relationships;Risk management;Construction drivers;Leading indicators
Abstracts:Projects in the architecture, engineering, and construction (AEC) industry often have at least one stakeholder who perceives a benefit from an early start to construction. As a result, project teams face pressure to begin construction, whether or not they are in fact ready. In order to begin early mobilization, engineering design drawings are then rushed and assumptions left unmitigated, resulting in inaccurate plans and, often, unrealistic schedules. The construction phase of the project is then impeded by costly interruptions and delays. When a construction project experiences delays and cost overruns, litigations, claims, and disputes often occur as a result, adding additional financial strain to all parties involved, while jeopardizing valuable business relationships. To better understand this reoccurring phenomenon, the Construction Industry Institute (CII) commissioned Research Team 323 to examine premature starts to construction and to find if there are any leading indicators that may signal a premature construction start. The purpose of this research was to investigate how premature starts to construction could negatively impact a project outcome through litigations, claims, and disputes. The underlying goal of the research was to investigate how such negative project outcomes can be avoided through understanding premature start leading indicators, drivers, and the various impacts. Specifically, 10 leading indicators, nine drivers, and 13 impacts were identified in projects with premature starts to construction. Commonalities and severities of these items were quantified through survey-based research. From the data, the top three most common drivers which cause a premature start to construction are owner mandated overly aggressive schedule, owner perceived benefit for early start, and time to market, respectively.
Chinese Organizations’ Actions, Attitudes, and Motivations When Faced with Counterfeit Items in Their Construction Supply Chains
orcid;Fernando Corona;E. Douglas Lucas;Yuanxin Zhang;Jiayi Pan;Russell C. Walters
Abstracts:The construction industry, like so many other industries, has been affected by counterfeiting. In fact, research has found that counterfeiting has become a significant and growing problem within the construction industry, and China has been identified as the main source for the production and commercialization of counterfeit construction commodities worldwide. This paper identifies both the actions and attitudes taken by Chinese organizations when counterfeit items are discovered in their supply chain and compares them to those of Chinese construction personnel in different parts of the industry. The paper then discusses possible reasons for the proliferation of counterfeiting in China when Westerners regard the practice as unethical behavior. The latter is accomplished through an analysis by an acknowledged expert in the science of human behavior among the group of authors, along with input from other experts in the literature. The former is accomplished by analyzing the answers to four questions by five groups of people (70 total respondents) within the Chinese construction industry. First, the answers of the general population were analyzed, and then the opinions of contractors, owners, manufacturers, and suppliers were compared to one another.
Proper Risk Allocation: NDFD Clause
Awad S. Hanna;Hala Nassereddine;Justin R. Swanson
Abstracts:Delay is an ever-present risk on any construction project that causes run up costs. Owners (sellers) and contractors (buyers) who enter into a contract are keen to mitigate the economic risks that they will have to bear as a result of the delays. In order to address delay damages and transfer risk, an owner may often include a no-damage-for-delay (NDFD) clause in his agreement with the contractor. This clause contractually provides time relief and excludes delay damages to insulate the owner from the contractor’s claims. While the owner is protected under this clause, the contractor is left exposed to significant financial damages. Generally, NDFD clauses are enforced as written, but there are certain circumstances that circumvent its enforceability. Courts and administrative boards have recognized exceptions to the enforcement of NDFD clauses and have acknowledged the right of the contractor to recover delay damages. The main objective of this paper is to identify the risk associated with a NDFD clause and outline the exceptions to the enforcement of this clause. Several legal cases and articles were reviewed, examined, and analyzed to best fulfill the objective of this research and identify ways to effectively manage risks associated with NDFD clauses. The results of this legal research are summarized in a flowchart that lays out the allocation of delayed risk when a NDFD clause is present. This flowchart will provide guidelines to construction professionals about the legal issues and considerations that may be faced when a NDFD clause is present.
Identification and Analysis of Owner-Induced Problems in Design–Build Project Lifecycle
Mahya Hoseingholi;M. Parchami Jalal
Keywords:Design-build;Owner;Problems;Advantages;Disadvantages
Abstracts:Given its advantages, the design-build method is one of the modern methods of management and project delivery to which owners have paid particular attention in recent years. However, because owners are not fully aware of the terms of two-factor contracts, and due to a lack of complete rules and regulations in this respect, the implementation of projects that use the so-called method has faced various challenges. The present study is conducted in Iran; therefore, it attempts to identify and analyze the problems associated with this type of contracting system that curb access to the design-build advantages in this country. Moreover, the present study provides certain recommendations and suggestions that would prove quite helpful in boosting the current conditions. According to field researchers who based their work on interviews with experts—including questionnaire designing, distributing the questionnaires, collecting, and analysis of the responses—findings reveal that the most significant problems arising from this kind of implementation system indeed originate from ownership systems.
Review of the Effectiveness of Arbitration
Amit Moza;Virendra Kumar Paul
Abstracts:Disputes are common and unavoidable in any construction project. These must be resolved in a timely manner lest they adversely affect time and cost aspects of the project and even affect its economic viability. Arbitration has been used as a means of dispute resolution as it is considered to be a speedier and more cost-effective way of conflict resolution than litigation. However, the arbitration process has often been marred by delays leading to time and cost escalation, thereby failing to meet the very purpose of relevant legislation. With the construction sector undertaking more complex projects, disputes will require an efficient redressal mechanism. The present study has been undertaken to understand and evaluate the effectiveness of the current arbitration procedure in India, specifically those under the public sector. An assessment has been done to determine its adequacy to meet the complexities and challenges of the contemporary construction sector. A total of 22 cases of arbitration from the Central Public Works Department (CPWD) have been considered for the present study. Total times for arbitration and durations between various stages of arbitration have been captured to bring out the fact that arbitration takes longer than desired. The study reveals that appointment of arbitrators and frequent changes in arbitrators are the main reasons for delays in the arbitration process. In addition, submission of claims and counterclaims coupled with an increased number of hearings also result in delays in overall process of arbitration. Recommendations that can assist in speeding up the settlement of issues are proposed on the basis of this limited study.
Critical Analysis of Whistleblowing in Construction Organizations: Findings from Hong Kong
Olugbenga T. Oladinrin;Christabel M. F. Ho;Xue Lin
Keywords:Barriers;Construction organizations;Hong Kong;Misconduct;Whistleblowing
Abstracts:Effective whistleblowing in construction organizations can forestall severe consequences and economic losses that may result from undetected misconduct. Aiming at facilitating whistleblowing procedures, this research investigates current whistleblowing practices in the construction organizations in Hong Kong. Nineteen in-depth semistructured interviews were conducted focusing on three critical dimensions in relation to whistleblowing: effective mechanisms; barriers; and recommendations. The results show that, although the hotline is receiving infrequent usage, it is one of the most common means of reporting wrongdoings. Whistleblowers can choose either external or internal procedures to disclose observed misconduct, yet they tend to keep silent or report internally, mostly to their direct supervisors within their organizations. Obstacles that could hinder the effective whistleblowing including cultural barriers, negative management attitude, fear of retaliation, inaccurate estimations of severity of misbehaviors, are identified from the interviews. At last, practical recommendations are suggested that anonymous reporting channels along with a protection scheme for whistleblowers should be firmly introduced to enable convenient and safe disclosures. Conducting training programs to foster favorable culture is also a strategy to promote effective whistleblowing in organizations. The results have appealing implications for both researchers and construction practitioners.
Special Issue on Professional Ethics in Engineering and Construction
Tara Hoke
Studying Payment Provisions under National and International Standard Forms of Contracts
Islam El-adaway;Salwa Fawzy;Hunter Burrell;Noor Akroush
Abstracts:Delayed payment is becoming a critical issue in the construction industry. Late payment and/or nonpayment cause severe cash-flow problems to contractors and across the entire contracting supply chain. There are many factors that cause late payment problems, including owner’s poor financial management; disagreement on valuation of executed works and consequent delayed certification; using paid-when-paid clauses with subcontractors, suppliers, and manufacturers; and noncompliance with contractual provisions in requesting and claiming payments. The objective of this paper is to present a study of the payment provisions under most widely used standard construction contracts, both nationally and internationally. This paper studies the payment provisions under traditional standard construction contracts including those published by the American Institute of Architects (AIA), ConsensusDocs, Engineers Joint Contract Documents Committee (EJCDC), International Federation of Consulting Engineers (FIDIC), World Bank, Joint Contracts Tribunal (JCT), and the New Engineering Contract (NEC). As dictated by the descriptive nature of this paper, the authors used a desktop analysis involving three dimensions for studying payment provisions that included reviewing the procedure for requesting payment, time limits for payments to be made, and the associated remedies of a contractor if a payment is delayed. Ultimately, the study concludes with a comparative analysis of all contracts under investigation. By providing concise guideline for payment provisions under different standard construction contract, this study is expected to better educate the associated stakeholders toward best practices for administering construction projects. This should help empower downstream cash flow within the contracting supply chain, which would ultimately help mitigate project delays, as well as the interrelated claims, conflicts, and disputes.
Contractual Approaches to Address Geotechnical Uncertainty in Design-Build Public Transportation Projects
Carla Lopez del Puerto;Douglas D. Gransberg;Michael C. Loulakis
Keywords:Geotechnical;Risk;Design-build;Contract formation;Procurement
Abstracts:Geotechnical uncertainty may be the most difficult risk to manage in construction. In design-build (DB), where the project’s price is fixed before design and in many cases the subsurface investigation is complete, the risk profile is fundamentally changed and the owner must address it. This paper assesses the potential of DB as a tool for addressing geotechnical uncertainty in public transportation projects by comparatively evaluating three successful approaches. The first case study involves the use of a geotechnical baseline report as a subsurface condition risk allocation tool. The second uses unit price pay items inside the larger lump sum contract to share the geotechnical risk with the design-builder. Finally, a “nested DB” landslide repair clause inside a design-bid-build interstate highway contract successfully addressed the post-award potential landslide risk. The paper concludes that each of the contractual management approaches provided an effective means for addressing geotechnical uncertainty in DB public transportation projects.
Guidelines for Recovering Home Office Overhead Costs with Emphasis on the Eichleay Formula
Benjamin T. Davis;William Ibbs
Abstracts:Home office overhead (HOOH) is the cost associated with higher-level management and other related resources needed to indirectly support a construction project. It is often not tracked in direct relationship to a particular project because that type of support is needed to support more than one individual project. Over the past several decades, numerous disputes have led to court trials where the Eichleay formula was applied as the method for calculating unabsorbed HOOH resulting from project delays. Eichleay has been a point of controversy ever since its inception in 1970, so much so that not all courts have accepted the formula and some have created their own. Court cases have a definite theme attributable to when one may apply and what needs to be proven to recover using this formula. This paper develops and discusses those criteria so that parties involved can better influence the outcome of such a dispute. It is based on a case review of court and board decisions rendered over the past 50 years. In addition, general guidelines for measuring and collecting unabsorbed HOOH outside that of Eichleay are presented as developed by analysis of cases reaching back as far as 1873.
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