BUILDING DISPUTE MANAGEMENT - BOYLING POINT WITH CHRIS BOYLE

Someone once asked me how to avoid a dispute. I thought about the answer for a while and eventually said something like

...in the building industry disputes are almost inevitable...
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There are always things we can do to minimise the opportunity for disputes to take hold and when or if they do, to manage them to reduce the collateral damage. 

The definitions of “dispute” and “disputable” talk about disagreement, argument and things that are open to question or uncertain. 

Building is a complex process that a lot of us in the industry take for granted sometimes because we are exposed to it every day and it has become second nature. There are usually many trades involved, many suppliers, several locations or sites, and worksites are largely uncontrolled when compared to a factory. For many consumers of building work, it will be their first building experience or a repeat of an infrequent process. 

The first step in avoiding a dispute is to make sure the contract documents properly describe the works to be undertaken. Plans need to be clear and comprehensive and show the shape, size and location of the work. The specification will describe the materials, inclusions and finishes. The general conditions of contract will set out the contract sum and how it is to be paid and how long the work will take. In some form or another these elements need to be included in any contract. The clearer the contract documents means less uncertainty or matters that are open to question and hence disputable. 

The other most important factor in avoiding disputes is the make sure the contract price adequately reflects the risk. To do that you will need to know what all the costs of the work are and who you are entering a contract with. In this regard costs include and on-site costs and any off-site costs such as head office overheads. Lock your sub-contractors and suppliers into contracts as soon as possible after signing a head contract. Make sure your margin or profit reflects the risk you have purchased by signing the contract. To properly evaluate the risk, you should know something about the person or organisation you have contracted with. Is there any likelihood of a delayed or disputed payment? What might it cost to pursue an outstanding debt? In most cases the risk of non-payment is minimal but should that occur the impact on your financial position could be devastating so I always suggest thinking about that risk carefully before finalising a tender bid. 

The other major factor in avoiding disputes is to do good, defective free, work that is compliant with the contract documents. Be good at what you do. 

Because building is often carried out in an “uncontrolled” environment and there are many aspects to coordinate, mistakes will happen. When they do it is always best to recognise what has happened and discuss straight away with your client. Provide solutions, don’t argue or ignore, and resolve as soon as possible. A small cost absorbed early may prevent something escalating. 

Remember we are in building as a business because we love it and because we can make it profitable. Any dispute will impact that profitability so avoid disputes at all cost. 

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This article was written by Chris Boyle as our second edition of the Boyling Point series.