The earlier a dispute, or potential dispute, in a building contract is dealt with the better the chances of an equitable and prompt solution, says Uwe Putlitz, CEO of the Joint Building Contracts Committee (JBCC).

JBCC is a non-profit company which represents building owners and developers, professional consultants, and general and specialist contractors who provide input for the compilation of JBCC documents that portray the consensus view of the constituent members.

JBCC documents – which are published and periodically updated to promote standardisation and good practice – carry Construction Industry Development Board (CIDB) approval for use by national, provincial and local authorities in South Africa.

Putlitz says dispute and conflict on building sites are nothing new but tend to increase during difficult trading conditions when all the parties involved are seeking to contain costs and survive building slumps.

The fact that new and relatively unestablished sub-contractors are now  increasingly present on building sites can also lead to misunderstanding and, in some cases, the new companies feeling somewhat intimidated, all part of the recipe for conflict – which needs to be nipped in the bud.

“JBCC experience over the past two decades has shown that dealing with conflict early is essential because positions initially are not so entrenched, others are less likely to have started to take sides, and negative emotions not so extreme. The best way to address a conflict is at the outset through negotiation between the participants.

“Conflict can be destructive, leading various parties involved in a building project to develop negative feelings toward each other and spending energy on conflict that could be better applied on completing a project on time. It can also deepen differences, and lead groups into hostile positions. Yet most cases of conflict that the JBCC encounters could have been prevented by timeous preventative action,” Putlitz adds.

 

Important guidelines

Here he provides important guidelines to help reduce often expensive and time consuming claims in building disputes:

1. Planning: A pro-active project manager should anticipate and avoid potential problems rather than rectifying problems that have already occurred;
2. Recognition: Recognising a potential dispute timeously may enable a contractor or employer to timeously take action to limit or avoid a claim or litigation;
3. Communication: Parties to an agreement and their agents must communicate freely speedily and be able to refer to others for a prompt decision. Employers should recognise that their representatives may be reluctant to acknowledge a problem to conceal delays and/or additional costs. The contractor’s staff may similarly want to conceal a possible problem from their superiors. Both situations will lead to confrontation, especially when the employer is presented with an unexpected claim near the end of the project.
4. Defining the consequences: The parties must deal with a (potential) problem as soon as it arises and   reach consensus on the possible impact, extent, cost, and plausible solutions;
5. Notification: A potential problem identified by the contractor must immediately be notified to the employer or the employer’s representative. Failure to do so, by either party, could result in a claim and/or litigation. Each party must provide factual evidence to substantiate its position. A late or ill-prepared claim places both parties in difficult position by limiting possible options and/or resolutions;
6. Documentation: The maintenance of current and accurate project records is critical throughout a project, particularly if a disagreement or a dispute should arise. Records should clearly show a logical cause-and-effect relationship between any unanticipated events and its consequences to demonstrate the full effect of the events that occurred;
7. Contract Documents: The contract documents must be fair to both parties and specific to the project. Each party to an agreement must be provided with a copy of the contract documents.  One-sided contracts promote disputes that often end in litigation;
8. Contract Instructions: The principal agent must administer the issue of contract instructions promptly in accordance with the provisions of the agreement, clearly defining the scope of employer-authorised additional work or omissions and the allocation of costs;
9. Impact of delays and time and money claims: The contractor must promptly assess the direct and indirect implications of a delay/disruption to the project completion dates and possible resultant cost implications. The contractor must also confirm that resources to undertake additional work are available without disruption to the regular scope of work. The employer must recognise the contractor’s right to compensation and fair profit on any additional work; and
10. Solution: The parties must cooperate to determine the most cost-effective method to deal with a particular problem, possibly by alternative solutions for which neither party should assume total responsibility.

“Consensus and teamwork remain integral parts of the process to ensure that project risks remain fairly allocated to both parties,” Putlitz adds.