Journal of Legal Affairs and Dispute Resolution in Engineering and Construction

Existing research on smart contracts in construction primarily concentrates on their operational stage and the mechanics of their potential operation. The response to the question “Can we do it?” is a resounding yes. The next question to answer is “How do we do it?” The answer to this question involves a consideration of the adoption of smart contracts and their synthesis with the entire construction process, from procurement to the in-use phase. Particular attention is needed for integration into complementary and receptive working practices resulting in optimum conditions for adoption. The current risk is that smart contract adoption may suffer from a lack of clear guidance and occur on a piecemeal and ad hoc basis. This study proposes a principled approach to counter this risk. This approach has been seen before in construction law in the form of the Abrahamson principles, which are a seminal reference point in any discussion of construction law. A framework is proposed, based on five key principles, to guide the automation of contract terms, highlighting the importance of control, codifiability, consideration, efficiency, and data access. The approach uses an interdisciplinary methodology with an applied professional constituency to promote law reform–based research. The inductive/deductive approach aims to share insights with the hope that the resulting principles will aid in the incremental implementation of smart contracts in the industry.

The transportation construction industry is experiencing a substantial risk of material price volatility impacting owners and contractors in successful delivery of projects on budget and on time. The risk is significant for design-build (DB) transportation projects as the entire risks for design and construction services are transferred to design-build teams. Unlike traditional design-bid-build (DBB) projects, the detailed quantities are not specified in DB transportation contracts that are typically fixed-priced contracts. Also, DB transportation projects are often large and multi-year, exacerbating the risk of material price uncertainty over the long project duration. Price adjustment clauses (PACs) have been introduced as a risk allocation mechanism to stabilize the bidding environment for transportation projects. While PACs have been employed in DBB projects for some time, the use of PACs for DB transportation projects is still at an early stage. Therefore, there is a need to better understand how various transportation agencies have incorporated the PAC into their DB transportation projects. The major objective of this research is to examine the current utilization of the PAC among state DOTs in their DB transportation projects. This study employs a combination of survey questionnaires and semistructured interviews involving subject matter experts from state departments of transportation (state DOTs) engaged in alternative project delivery to highlight the widespread adoption of PACs for four primary material line items: fuel, steel, asphalt, and portland cement. The main findings of this study show that while the PACs are adopted at varying levels across different states, they are not seen as critical deal-breakers, as their absence does not significantly deter industry participation in transportation DB projects. Rather, they are generally viewed as more beneficial in multiyear and large DB transportation projects, where price fluctuations and cost escalation are more likely. This study contributes to the body of knowledge on transportation DB projects by providing valuable insights into the thresholds and mechanisms used for price adjustments within PACs, showcasing how they enhance risk allocation. Additionally, this study recognizes the implications of recent events, such as increases in inflation and interest rates, on the consideration of PAC implementation and expansion. Finally, from a practical standpoint, these findings offer state DOTs invaluable guidance to enhance procurement strategies and contract provisions, and increase competition in the infrastructure market, ensuring successful project execution and financial feasibility in transportation DB projects.

Investigating the implications of integrating building information modeling (BIM) with claims management and the consequent effect on quantity surveying practices is essential for advancing digitalization and for avoidance of disputes in construction. Based on primary semistructured interviews with eight construction professionals in the UK and 48 peer-reviewed articles (secondary data), BIM’s potential to enhance collaboration, improve cost estimation, and streamline claims management processes using text mining was studied. Text mining collocation analysis was applied using RStudio to elicit BIM and claims management concepts. The findings suggested that although BIM integration offers considerable benefits, challenges—such as resistance to change, lack of standardization, and the need for continuous upskilling—may hinder its full implementation. These findings contribute to the emerging need for as-built intelligent BIM with claims management operations in the construction industry from a theoretical perspective. BIM’s potential to redefine the role of construction professionals such as quantity surveyors may engender a collaborative construction sector because of the efficiency it brings to the construction industry.

Developing economies worldwide are pressed by the fundamental need of housing for their citizens. The present study assessed the influence of the existent legal environment in India on the delivery of assets in private housing market. In mass urban housing supply by private real estate promoters/developers, 14 key factors contributing to deficient housing supply were identified from within the framework and interpretation of real estate laws, while 33 factors captured deficiencies in execution of laws. A questionnaire survey was undertaken to gain the viewpoints of relevant sector-specific stakeholders on the identified factors. Statistical analyses were conducted to arrive at factors bearing statistical significance to deficient housing delivery. Gaping loopholes in the framework and interpretation of real estate laws were ascertained to have been further exacerbated by inefficiencies in execution of laws. The findings reflect the pressing need to enhance the efficiency of existent legal environment to optimize housing delivery in India.

Abstract

Disputes are inevitable in the construction industry due to the complex characteristics of the construction projects and the involvement of different stakeholders, and they can be considered as a major hindrance obstructing the successful completion of a project. The drawbacks of the dispute resolution mechanisms (DRM) used in projects have directed attention toward dispute avoidance based on the concept of prevention is better than cure. Conversely, previous studies emphasized that disputes in a project are the consequences of procurement approach used to some extent and the likelihood of disputes seems less in the projects procured under collaboration or partnering. Therefore, this study investigates dispute avoidance from the perspective of procurement methods. Following a comprehensive literature synthesis, case study approach was used by selecting one (01) case from four (04) different procurement methods and research data was collected through semistructured interviews. The findings revealed that the highest number of disputes occurred in the traditional method and the lowest in the collaborative approach. The dispute avoidance strategies varied in terms of procurement method adopted, due to their salient features. However, strategies like negotiation, proper tendering process, proper contract preparation and contract administration, and appointment of a third party from the initial stage of the project irrespective of the procurement type were common in all projects. Moreover, the highest number of key features which proactively avoid disputes were identified in the collaborative approach. Therefore, this study recommends collaborative procurement as the most suitable method to avoid potential disputes in a project.

Practical Applications

The main contribution of this study is investigating the dispute avoidance strategies implemented from the perspective of procurement methods in the Sri Lankan construction industry. Further, it provides insight into the current nature of the procurement methods used and key features of procurement methods which avoid disputes. Moreover, it recommends dispute avoidance strategies to be implemented from the initial stage of a project to enhance the success of construction projects. The result of the study will be beneficial for the industry practitioners to ensure the completion of the project while reducing the impacts from disputes in terms of cost, time and quality by identifying the dispute avoidance strategies to be implemented in the basic stages of a project and to select the most suitable procurement method based on its key features on dispute avoidance.

Stakeholders are classified either as internal or external in extant literature. However, it is observed that critical activities such as work front availability, clearances, and utility shifting are influenced by a third category of stakeholders who display unique characteristics that differentiate their behavior from the previous two types. Hence, this study introduces a third category-extraneous stakeholders—with characteristics distinct in their relationship to the project and behavior. The study maps the performance of such stakeholders to the resulting consequences leading to disputes in Indian Infrastructure projects. To do so, the study utilized data from 100 court cases in India that revealed dispute genres related to extraneous stakeholders. Further, semistructured interviews were conducted with 14 experts to comprehend the influence of such stakeholders’ performance on dispute-related risks. Finally, case studies of five infrastructure projects were undertaken to confirm and validate the findings. The analysis demonstrated that extraneous stakeholders usually fail to deliver time-bound results, thus increasing project uncertainties. Such uncertainties predominantly supervene the disputes between the employer and the contractor that remain challenging to settle. The incentive structures and the contractual obligations designed for extraneous stakeholders become essential. To this end, four mitigation strategies are highlighted, and the strategies’ effectiveness from the perspective of extant strategic management theories is discussed.

Abstract

The selection of qualified contractors for construction projects plays a pivotal role in ensuring the quality of project delivery, and as such, represents a critical decision for project owners. For an informed selection, multiple criteria, such as cost, quality, experience, safety records, and past performance, need to be considered. However, due to the multiple criteria for contractor prequalification, each with varying degrees of relative importance that are difficult to measure using quantitative data, the selection process can prove challenging for owners. The objective of this paper is to propose a model for contractor prequalification that combines the use of a fuzzy expert system and hierarchical diagramming. To achieve this aim, we first utilized various types of questionnaires to gather the main criteria, relevant subcriteria, and initial fuzzy numbers. Subsequently, we developed a fuzzy expert system for each subcriterion and the main system. Finally, by exploring different t-norms, s-norms, defuzzification types, and tuning membership functions, we selected the best type of fuzzy system for each criterion. MATLAB software was employed for coding purposes in this study. In order to validate the model’s efficacy, a comparative analysis was conducted between the scores assigned to individual contractors as generated by the fuzzy logic model, and the factual scores allocated to the respective contractors. The observed discrepancy in the model’s accuracy ranged between 10% and 15% which means an 85% to 90% similarity between the model’s evaluation and actual scoring.

Practical Applications

Selecting competent contractors for construction projects is crucial to ensuring project quality and success. The paper introduces a groundbreaking approach to simplify this process. Traditionally complex due to diverse criteria and their varying significance, contractor selection is now more accessible. In simple words, this research introduces a smart method for choosing the right contractors. By combining a fuzzy expert system and a clear hierarchy, the study makes it easier for project owners to pick the best team. Imagine having a tool that considers multiple factors, even those that are not easily measured, to help you choose contractors wisely. This approach, developed using various questionnaires and advanced algorithms, empowers project owners to make more informed decisions. In essence, this research streamlines contractor selection, ensuring projects have the best possible chance for success.

Abstract

Fixed price contracts are common in construction. However, extreme turbulences within the construction sector due to the COVID-19 pandemic and other events over the last few years questioned the suitability of fixed price contracts during crisis times. This research investigated the financial loss experienced by construction contractors bounded by a fixed price contractual mechanism during the crisis induced by the COVID-19 pandemic. Financial implications of fixed and fluctuating price contracts were modeled using cost data from a typical construction project and two construction price and cost indices published by the BCIS UK. A total of 12 project scenarios were modeled to represent 3 projects that started a few months before the pandemic, agreed and started during the early phase of the pandemic and agreed and started during the exit phase. Findings show that fixed priced contracts agreed upon before the pandemic and ended in the early months of the pandemic were not in an adverse financial situation. Fixed priced contracts agreed before the pandemic and completed during the pandemic had a high chance of falling into a negative financial crisis, particularly if the project lasted longer. Fixed priced contracts agreed during the exit phase of the pandemic were in a significant adverse financial situation. Fluctuating price contracts could place contractors in a favorable position to avoid significant financial losses during crisis times. Other limitations associated with mechanisms that need to be considered and addressed through further research were also discussed. The finding highlighted the deficiencies in conventional practices of forecasting construction costs and market trends. It emphasized the need for investigating alternative cost modeling approaches that could consider multiple stressors and cascading impacts of such events during crisis times.

Practical Applications

Construction contracts could be agreed upon to include either fixed prices or fluctuating prices. In fixed-price contracts, contractors must estimate and agree on prices in advance by considering any possible fluctuation during the project. During the actual implementation of construction works, the contractor will absorb any unforeseen cost fluctuations. In fluctuating price contracts, contractors agree on prices based on the market conditions of a specified base date, and any fluctuation of prices due to the change of circumstance during the actual implementation of construction works will be paid to the contractor based on a preagreed formula and price index. This research investigated the financial risk of fixed-price construction contracts during extreme crisis periods taking the COVID-19 pandemic as an example. Authors found that fixed-price contracts agreed prior to a crisis period and ended during the early phase of a crisis may not be adversely affected. However, fixed-price contracts agreed during and later phases of a crisis period have a high chance of suffering significant financial losses beyond the profit margins.

The design-build (DB) contract has become one of the most popular methods for delivering projects in the public and private sectors because it provides several advantages over the conventional design-bid-build system in terms of time and cost savings. However, despite the widespread use of this form of contract, empirical evidence demonstrates that there are some issues and challenges with its application. This paper explores these issues and challenges through a case study of the Gelora Bung Karno Project (the GBK Project) in Indonesia, a nationally significant government project executed using a DB contract. The primary data used in the paper were collected from in-depth interviews with key resource persons directly involved with the project, and secondary data were compiled from various sources, including technical and media reports. This study revealed disparities in the perceptions of a DB contract among the client of the GBK Project, its design-builders, and the Audit Board of Indonesia (Badan Pemeriksa Keuangan or BPK)—the state auditor. A lack of proper perception of the DB contract system has resulted in claims and disputes in the GBK Project. The findings suggest that in order to utilize a DB contract effectively, the client must have a clearly defined scope of work, as demonstrated in the basic design. Also, the client and design-builder must be familiar with the audit system from the perspective of the Indonesian government, which means that there are specific requirements and fundamental guidelines governing the audit of a DB contract.