Avoiding contractual disputes

May 06, 2024
Avoiding contractual disputes

Majed Garoub

A successful contracting project requires collaboration among all parties to achieve the common goal of stakeholders, whether they are public or private sector owners, contractors, legal consultants, or engineers, starting from the planning stages through decision-making and execution to project delivery.

Each stakeholder should have specific responsibilities to enhance productivity and awareness of project tasks, leading to fewer disputes.

The construction sector, including building and infrastructure, is a complex architectural field where engineers and contracting companies collaborate despite differing profit goals, capacities, talents, skills, and experiences, aiming to complete the project on time, within budget, and according to quality standards set by the owner or stakeholders.

Differences in skills, responsibilities, perceptions, concepts, knowledge levels, and experience among contractors, consultants, and engineers, along with poor management, often lead to disputes that must be resolved amicably to avoid project delays.

While disputes are inevitable due to the changing and complex nature of the construction industry, they can be mitigated through proactive measures for swift resolution, sometimes resorting to arbitration for specialized expertise in such matters, as arbitration is only suitable for issues in mega projects.

Successfully identifying, managing, and allocating risks in the project's early stages is crucial for its success, starting with selecting the appropriate financial allocation method based on project requirements and goals, followed by preparing tender documents containing suitable quality standards.

Common mistakes include financial allocation methods that often restrict contractors' early contributions and project supplies, yet these practices can help avoid future disputes. Contract documents should be prepared and signed after consultation with all stakeholders and relevant parties, with lawyers and engineers together avoiding unnecessary complexities.

Contract management requires a comprehensive understanding of parties' obligations and responsibilities, recommending contract review by a specialist in contracting contracts, especially for large projects like power plants, oil refineries, and petrochemical factories. Aside from disputes, another inevitable aspect of construction projects is change orders. It is essential for the contract to specify who can issue change orders and the communication channel. For example, change orders should ideally be written and issued to the contractor by the owner, consultant, or contract administrator.

Effective change management is the cornerstone of any successful project. Incomplete designs are another common cause of disputes in construction projects. Incomplete design or errors within the design often lead to changes resulting in delays, disruptions, and additional costs. It is advisable not to proceed with the construction phase until comprehensive and accurate design is completed and approved by all parties.

Parties should maintain good records because in case of disputes, these records and all project documents are not only essential for proving entitlement but also aid in resolving disputes during negotiations. It is important to note that typically, the team with complete records and documents is more likely to win disputes, further emphasizing their importance for successful outcomes. In conclusion, the key to successful contracting projects lies in obtaining the correct legal and engineering foundations from the outset.

May 06, 2024
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