The world’s construction sector needs to adopt best practice processes in dispute resolution in order to deliver maximum efficiency and benefit for the economies and societies which the industry serves, an internationally renowned construction lawyer says.
Speaking to Sourceable on the eve of a major international conference on dispute resolution, Adjunct Professor Kim Lovegrove MSE RML, chairman of the International Building Quality Centre (IBQC), told Sourceable that new approaches toward resolving disputes are needed around the world.
According to Lovegrove, the importance of this should not be underestimated.
At a macroeconomic level, construction accounts for a significant portion of many economies and delivers the buildings and infrastructure upon which economies and societies are based.
As a result, it is critical that the sector operates both efficiently and effectively. This cannot happen where parties are embroiled in lengthy and expensive disputes.
Beyond this, drawn out disputes can have financial and emotional impacts upon those involved.
“One thing that ties both emerging economies and developed economies together is that the cost of construction dispute resolution is increasingly very challenging for ‘Main Street,’” Lovegrove said.
“It is a long and costly process. Consumers on many occasions have aired their frustration about the length and cost of construction dispute resolution. And in emerging economies where you have widespread poverty, construction dispute processes are inaccessible because they are cost prohibitive.
“But the other thing is that whether you are a builder, a consumer or an architect, you are all going to want to see more cost effective and affordable dispute resolution.
“In many economies, the construction industry is one of the largest industries. In Ethiopia, for instance, I was recently informed that it is their largest industry. When you have a huge sector of the economy that generates a tremendous amount of GDP, you want to maximise your efficiencies.
“So there is a universal desire on the part of the key actors – the consumers and the building industry – to have more timely and cost effective construction dispute resolution.
“Another factor is the impact in terms of commercial relationships between head contractors, subcontractors and builders.
“If these players can resolve disputes through mediation and negotiation rather than through an adversarial approach, they will be able to keep their commercial relationships intact.
“And then finally, in terms of consumers, you have the emotional cost. I don’t know how one measures that. There is a financial cost (of disputes) and an emotional cost. They are intertwined.”
Lovegrove’s comments come amid ongoing recognition of the impact of construction disputes around the world.
Throughout calendar 2021, international built environment consulting firm Arcadis reports that the global average value of disputes on major projects amounted to $US 52.6 million per dispute.
According to that report, the average dispute on major projects took more than one year (15.4 months) to resolve.
(Note: this data refers to disputes on major projects only. In the case of smaller residential projects, average dispute values and timeframes will be lower compared with those quoted in the Arcadis report.)
The comments also come on the eve of the IBQC Global Construction Dispute Resolution Conference, which is being hosted by the International Code Council and the International Building Quality Centre (IBQC) along with co-sponsorship from The New Zealand Society of Construction Law.
Hosted over two sessions on Tuesday and Wednesday, the conference will bring together senior jurists, leading construction lawyers, economists and urban planners to address how the regulation and practice of dispute resolution can be reformed to deliver better outcomes and more affordable processes.
According to Lovegrove, a fundamental problem with current processes in many western countries involves an adversarial approach toward dispute resolution.
Indeed, he points out that the word ‘defendant’ means someone who defends – a phenomenon which promotes ideas of parties being pitted against each other.
This contrasts with the approach taken in Japan, which has a non-adversarial style that aims to foster convergence and bring the parties together.
An example of the adversarial approach can be seen through expert witnesses – professional expert individuals who are contracted to provide independent evidence on matters relating to disputes within a court or tribunal setting.
In typical cases, Lovegrove says that expert witnesses who are engaged by plaintiffs will ‘lock horns’ with those who are engaged by defendants. In more than three decades of practicing construction law, Lovegrove says he is yet to see any cases where evidence from the plaintiff’s expert witnesses agrees with that given by defendant expert witnesses in regard to either the cause of defects or the cost of rectification.
Going forward, Lovegrove says a cultural shift is needed toward a convergent approach which brings parties together.
He says action is needed in two areas.
First, mediation should be mandatory at the beginning of a dispute. This involves an independent, qualified person who works with all parties and facilitates the making of an agreement.
To guarantee independence, the mediator should be jointly funded by both the plaintiff and the defendant on a 50-50 basis.
Beyond that, it is imperative to address the expert witness issue referred to above and to bring together expert witness evidence. This involves the intervention of an independent, court-appointed expert who is able to diagnose and allocate responsibility for problems in a neutral manner.
“The central challenge is to move away from an adversarial and divergent approach in construction disputes toward a more convergent approach,” Lovegrove said.
“It requires a revolution of dispute resolution ethos to embrace convergent dispute resolution rather than divergent dispute resolution.
“The best way to do this is to fully leverage alternative dispute resolution through front-end, mandated mediation.”
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