Consensual Dispute Resolution

Michael Connor
The GCC region is seeing a shift towards consensual dispute resolution, a powerful approach in a fast-paced and often adversarial construction market.

Amid renewed confidence the Gulf Cooperation Council (GCC) region is experiencing a second construction boom. Public sector megaprojects are leading the field, notably the preparation for major sporting events in Qatar, flanked by major construction and transportation projects throughout the region. Things are different this time around. There’s a more measured approach to the region’s development spend, a drive towards more sustainable growth in the built environment, and far greater alignment with national economic visions. Key challenges include capacity pressures on labour and materials, and finding more collaborative ways of working in order to deliver these national visions.

The pace of construction suggests that a high volume of construction disputes will continue to challenge the industry. Iconic design ambitions, high project values, a history of selecting lowest bids, and unrealistic schedule expectations have combined to shape an adversarial climate. However GCC countries are among the least efficient in enforcing contracts through the judicial systems.

Traditionally, the interests of project owners and contractors have been pitted against one another, with most of the risk transferred down the supply chain. Buoyant demand has started to tip the balance of power towards contractors, who can increasingly pick which clients they work with.

Contractors have now become more confident about entering into disputes.

Contractors have now become more confident about entering into disputes. Over 60 per cent have been involved in disputes over the past 12 months, or expect to be involved in disputes over the next 12 months, and contractual disputes have been identified as a major external challenge [1].

Protracted disputes tie up resources in a market already suffering from resource constraint, resulting in increased costs and delays. Average value of disputes in 2013 was US$50-60 million, taking 12-18 months to resolve via traditional means. Early effective resolution enables completion and the reallocation of resources to other projects.

Although consensual dispute resolution approaches are at the early stage in this maturing construction market, there is an appetite for swifter outcomes that preserve working relationships. Consensual dispute resolution offers a powerful and cost-effective solution, avoiding lengthy and costly arbitration or litigation.

Early effective resolution enables completion and the reallocation of resources to other projects.

There are many benefits associated with the consensual approach. The facilitated process aims to broker a collaborative solution, rather than one that’s imposed on the parties. It’s a private process which reduces reputational risk and allows business relationships to be maintained. As well as resolving the dispute, recovering from dissent should be part of the aim. This means the project, if still live, gets back on track and there’s less baggage the next time the parties encounter one another.

Flexibility is key – it’s likely that both parties will have to compromise. Most won’t have the in-house skills, experience and lateral thinking needed to make consensual dispute resolution work, so expert facilitation is important. Although these skills are already in use in the region, there is a need to raise general awareness, familiarise the client community with a new way of thinking, and instil confidence that it works.

Most won’t have the in-house skills, experience and lateral thinking needed to make consensual dispute resolution work, so expert facilitation is important.

Many disputes could be prevented altogether, by creating and implementing better contract conditions that encourage partnership models of working. Incentivising contractors rather than overloading them with risk would help to resolve some of the region’s delivery issues, as would avoiding the traditional low-price approach. Prevention begins at the earliest project stages. We encourage the parties to be collaborative and open, sharing information freely. Successful negotiation at this stage will help avoid problems as the project progresses, facilitating productive outcomes for all.

Consensual dispute resolution is not a new approach for Faithful+Gould, but we are tailoring it for the local market. We bring creative and innovative thinking to the contractual process, aiming for the smooth running of our clients’ projects, and the prevention of disputes. Where disputes have already arisen, we aim for efficient and effective resolution in a spirit of co-operation and continued commercial relationships. We handle complex and sensitive disputes in all GCC countries, delivering our services via an integrated project and programme approach.

References

[1] Construction Dispute Market Trends, Trowers & Hamlins, 2014

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Michael Connor Associate Director Contact me View my profile >