July 21, 2008

Use of dispute resolution services rises in competitive construction market

DAN PELTON

correspondent

The old adage “an ounce of prevention is worth a pound of cure” is particularly relevant in the construction industry when it comes to matters of dispute resolution.

Matthew Nicholas, a senior consultant with Revay and Associates Ltd., says prevention is what the consulting company “preaches to our (clients).

“They should read the contract. The contracts are coming out with a number of unfair clauses. The contractors are bidding in a very competitive market and sometimes they ignore some of these clauses that may become real issues or disputes later on.”

Revay deals with construction industry dispute resolution, as well as project management and consulting. In business for over 35 years, the company has offices in Montreal, Toronto, Ottawa and Western Canada.

Its principal aim is to act as a third party — not financially or emotionally involved with a project — that can offer an objective analysis of problems and unbiased recommendations for their resolution.

Over the years, Revay has prepared or evaluated over 2,500 claims that ranged in value from $10,000 to $150 million.

The tight industry network in construction means that word of disputes between owners and contractors can spread and cause damage to reputations, Nicholas explains.

Thus, a contractor may find it more difficult to find work and owners may be regarded with an unfair degree of suspicion when it comes to negotiating with contractors.

Nicholas, who holds a bachelor’s degree in architecture and a master’s degree in construction management, has been with the company since 1989.

He says that delays in a project are a major reason for disputes. “Delays are a major cause,” says Nicholas. “Sometimes owners and contractors are very optimistic. Then they experience delays that get kicked up to the dispute level.

“We maintain that contractors go through the contract very carefully and compare the terms to past experiences.

“If they feel uncomfortable, they should address it right away. Chances are the competing contractors will feel the same way.

“But we have noticed, in today’s competitive market, that contractors tend to ignore some of those clauses.”

Revay does not actually participate in the process of preparing contracts and the tendering.

It can, however, share its experience by providing consulting assistance to the principals (such as owners/lawyers) who are involved.

Often, Nicholas points out, disputes can be avoided when the parties involved draw up a schedule and adequately monitor its progress.

“Scheduling is a very good construction management tool,” he says.

“Having one allows the owners to monitor the progress of the project. Even though they may prepare detailed specifications, the owners often don’t employ the proper personnel to monitor them.

“It is also good for the contractor. By consulting the schedule, he can identify the risk factors and provide contingency plans. Further, he can use the schedule to monitor the progress and substantiate delay claims.”

Consultants such as Revay will develop a work breakdown structure for project activities, provide a detailed project schedule that includes a network diagram, and update the schedule on a monthly basis.

In a worst-case situation where the dispute actually goes to litigation, Revay can provide customized coding systems to quickly retrieve factual information from documents.

In addition, Revay can assist in the preparation or evaluation of the claims and in the submission of expert opinions.

Should such problems arise, Nicholas says the best dispute resolution mechanism is that each party be reasonable and keep an open mind.

“Both sides should be fair. When the contractor submits a claim, he should be fair.

“When the owner reviews the claim, he should be fair as well. Then they can cut down on the number of disputes and come to a negotiated settlement.”

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