Quantification of Costs for Dispute Resolution Procedures in the Construction Industry
Publication: Journal of Professional Issues in Engineering Education and Practice
Volume 132, Issue 3
Abstract
The extent to which disputes affect the construction industry has been well-documented. There are a plethora of anecdotal stories, and even some data that explain how unresolved conflict can impact project cost, schedule, and quality. In response, many systems and procedures have been developed to address disputes and their resolution within the construction industry. However, no data exist that quantitatively compare these various alternatives and the real costs of resolving a dispute using methods other than litigation. This paper presents a framework for identifying and capturing the transactional costs incurred to resolve disputes throughout the full spectrum of resolution options. Transactional cost data from 46 recently completed construction projects, totaling over $2 billion of total installed costs, confirm that these sums can account for a large portion of the settlement/award amount, the original claim amount, and even the total contract value when using some dispute resolution methods. Furthermore, using dispute trend and cost data, a comprehensive dispute management system based upon the concepts of risk management is proposed, highlighting the overriding objective of promoting dispute avoidance/resolution in the most cost-efficient manner possible.
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Acknowledgments
This research was funded by the Alfred P. Sloan Foundation through the Center for Construction Industry Studies at the University of Texas at Austin. The writers would like to acknowledge the American Arbitration Association’s National Construction Dispute Resolution Committee, the American College of Construction Lawyers, the International Institute for Conflict Prevention and Resolution, and the National Academy of Construction for their cooperation and assistance. Sincere appreciation is also extended to Mr. James P. Groton and Mr. Steven D. Nelson for their tireless guidance and support.
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Information & Authors
Information
Published In
Journal of Professional Issues in Engineering Education and Practice
Volume 132 • Issue 3 • July 2006
Pages: 264 - 271
Copyright
© 2006 ASCE.
History
Received: Oct 20, 2005
Accepted: Feb 22, 2006
Published online: Jul 1, 2006
Published in print: Jul 2006
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