Introduction to Construction Dispute Resolution Feniosky Peña-Mora Gilbert W.Winslow Career Development Associate Professor of Information Technology and Project Management MIT Room 1-253, Phone (617) , Fax (617) Intelligent Engineering Systems Laboratory Center for Construction and Research Education Department of Civil and Environmental Engineering Massachusetts Institute of Technology Partnering

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 2 Definitions WHAT ADR Technique and Business Relationship Voluntary, Non-binding Process WHO All Parties WHY Development of a Synergetic Atmosphere Conflict Reduction and Objectives Alignment HOW Definition of a Strategy Training of Participants Building of the Partnering Atmosphere On-Site Meetings and Progress Reviews Project Close-out and Reflection on Effectiveness

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 3 Museum Project Publicly Funded Museum in the Northeastern United States Suffering from Insufficient Operating Revenues and Lack of Funding Expansion Project with a Government Subsidy of $900,000 Delivery System Adopted for Public Projects: Design-Bid-Build Proposed Bids ($1.2, $1.25, $1.4, $1.5 million) Exceeding the Engineer’s Estimate and the Available Fund Owner Hiring a New Consultant to Find a Solution

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 4 Case Study: Important Issues With No Extra Money Available, How Might the Owner Go About Lowering the Cost of Constructing the Design? If the Owner Asks the Designer to Make Changes to Reduce the Cost, Should There Be Another Competition to Decide the Lowest Bidder? Should It Be Awarded to the Lowest Bidder and Then Value Engineered With the Designer? The Second Lowest Bidder Submitted a Close Competitive Bid, If the Design Is Awarded, Then Changed, Can the Bid Be Protested? How Might Bringing Together the Designer and the Contractor on the Same Team Affect the Price?

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 5 Outline  Definition and Benefits of Partnering The Partnering Process Key Components of Partnering The Partnering Continuum

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 6 Definition and Benefits of Partnering Voluntary, Non-binding Teaming With One Set of Goals Core Components: Alignment of Objectives Clear Communication Integration Among Team Members Incorporation of DART

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 7 Partnering Experiences Pedestrian Bridge (Sherbrooke, Quebec) Central Artery and Tunnel (Boston, Massachusetts) Bus Garage (Cleveland, Ohio) Correctional Facility (San Diego, California)

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 8 Pedestrian Bridge Project: Footbridge Over the Magog River in Sherbrooke, Quebec Partners: Bouygues SA, the University of Sherbrooke, Quebec, and the US Army Corps of Engineers Main Objective: Promoting the Use of Reactive Powder Concrete in Structures

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 9 Central Artery and Tunnel Advantages of Partnering in the Central Artery and Tunnel Projects in the Following Areas: Cost Growth Schedule Growth Number of Change Orders Value Engineering Savings Communication

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 10 Bus Garage (Cleveland, Ohio) Direct Result of Partnering Problems Solved at Jobsite Levels Reduction of Arbitration and Litigation

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 11 Correctional Facility (California) 21-story Facility in Downtown San Diego Partnering Between the Tenant, the State Agency and the Main Contractor Benefits From the Input of the Tenant, the End- User of the Facility

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 12 Partnering Benefits Improved Communication Objective Alignment Cooperation Trust

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 13 Outline Definition and Benefits of Partnering  The Partnering Process Key Components of Partnering The Partnering Continuum

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 14 The Partnering Process Phase One: A Long Term Strategy Phase Two: Training Phase Three: Team Building Phase Four: On-site Implementation Regular Partnering Meetings Periodic Assessment Evaluation and Feedback Issue Resolution Process Innovation and Creative Project Solving Phase Five: Project Close-out

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 15 Outline Definition and Benefits of Partnering The Partnering Process  Key Components of Partnering The Partnering Continuum

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 16 Key Components of Partnering Project Charter: Mission Statement and Joint Objectives Team Assessment: Periodic Meetings and Surveys for Quality Control and Improvement Issue Resolution Process: Dispute Resolution Ladder Job Closeout: After-the-fact Review

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 17 Sample of a Project Charter “PARTNERING AGREEMENT We, the Bon Fouca Superfund Project Team, commit to work together with a spirit of openness and trust, and to respect the goals and needs of the stakeholders. OUR TEAM IS FOUNDED ON PRINCIPLES OF: Teamwork, Mutual Respect, Openness, Honesty, Trust, Professionalism, Understand One Another’s Positions, Walking the Talk” WITH THE OBJECTIVES OF:  Completing the project on schedule  Completing the project within budget  Developing and maintaining good community relations by minimizing impact to the community at large and coordinating actions through EPA head  Pursuing shared savings through value engineering  Developing an maintaining an awareness of safety – daily throughout the project – in order to achieve zero lost time accidents  Establishing a forthright approach to modifications and claims in order to avoid litigation  Remediating the site in accordance with the National Contingency Plan  Implementing total quality management concepts, specifically in administration, engineering, construction, and operations  Providing contractors the opportunity to make a reasonable profit  Enhancing reputations of the stakeholders with respect to public perception of remediation/superfund efforts We, the undersinged, in an effort to achieve the intent of the partnering process, commit the above principles and objectives.” Project Charter signed and stamped by each stakeholders Ellison el.al, 1995

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 18 Outline Definition and Benefits of Partnering The Partnering Process Key Components of Partnering  The Partnering Continuum

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 19 The Partnering Continuum Potential Benefits of Partnering Degree of Objective Alignment Cooperation (Collaborative) Collaboration (Value-Added Integrated Team) Coalescence (Synergistic Strategic Partnering) Competition (Adversarial) High Low High Thompson et al.,1998 Partnering

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 20 Tomlinson Bridge (New Haven, CT) Adversarial/competition Approach Main Reasons for Failure of Partnering: Unbalanced Risk Allocation by the Owner Non-alignment of Parties’ Objectives Lack of Trust Between Parties

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 21 Intel (Portland, Oregon) Client Authorities/ Utilities Project Facility Construction Team Process Owners Team Facility Operations Teams Local Codes State Codes Federal Agencies Utility Suppliers Architectural Team Engineering Teams Consultants Material & Equipment Manufacturers Trades Independent Testing Agencies Design/ Const. Miles,1996

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 22 Museum Project Value Engineering of the Design by the Consultant The Two Lowest Bidders Repricing for the Design Alternates and Selection of the Lowest Bidder ($1.0 million) Implementation of Partnering to Further Reduce the Cost : Collaboration between Consultant and Contractor for More Value Engineering Startup of Construction Before Finishing the Design Changes Implementation on an Ongoing Basis Synergetic Atmosphere: Cost Savings, Work on Schedule

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 23 Success Keys in the Museum Project Weekly Meetings between Participants Openness and Commitment of all Participants Upper Level Management Commitment and Cooperative Field Crew Claims Resolution on a Daily Basis Trade Contractors Involved in Value Engineering Results On-time Project Completion Total Cost:$890,000 Contract Signed at the End of the Project

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 24 Outline Definition and Benefits of Partnering The Partnering Process Key Components of Partnering The Partnering Continuum

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 25 Summary Partnering, a Complete System of Operation, not a DRL Stage Advantages: Less Exposure to Liability Through Open Communication Early Identification and Resolution of the Problems Risk Sharing Increased Productivity Better Quality Through the Empowerment of Workers Better Cash Flow and Reduced Costs Commitment of all participants Synergy and Objectives Alignment Win/win Philosophy Problems Associated with Partnering Demand on Everyone Committed to the Partnering Process Difficulty with Taking the Risk of Trusting Others Tendency to Believe in the Win/lose Approach

© Peña-Mora, et. al. 2002Introduction to Construction Dispute Resolution Chapter 4: Partnering 26 References [AAA, 1996] : American Arbitration Assiociation. Building Success for the 21st Century: A Guide to Partnering in the Construction Industry. Dispute Avoidance and Resolution Task Force of the American Arbitration Association [CII, 1991] : Construction Industry Institute. In Search of Partnering Excellence. Special Publication 17-1, Partnering Task Force [CIOB, 1999] : UK Department of the Environment, Transport and the Regions. Rethinking Construction: The report of the Construction Task Force to the Deputy Prime Minister, John Prescott, on the scope for improving the quality and efficiency of UK construction. July, 19 [Cowan et al., 1992] : Cowan, C., Gray C., and Larson, E. (1992). "Project Partnering."Project Management Journal, 22(4), [DRT, 1997/1998] : Dispute Resolution Times, (1997/1998). AAA Partnering Boosts Jail Project in San Diego. p. 7 Winter [DRT, 1998] : Dispute Resolution Times, (1998). AAA Cleveland VP Eileen Vernon. Partnering Aids RTA Project in Ohio. p. 8 April [Ellison et al., 1995] :Ellison, David, and Miller, David, (1995). Beyond ADR: Working Toward Synergistic Strategic Partnership. Journal of Management in Engineering, Vol. 11 (6), pp , ASCE X. Nov-Dec, New York [ENR, 5/27/1996] : Daniel, Stephen. System Approach Pays Big Dividends. Engineering News Record. McGraw-Hill, New York.Vol. 236 (21) p. 39. May 27, [ENR, 5/4/1998] : Angelo, William. Project Management, Partnering Goes Awry on Connecticut Bridge Job. Engineering News Record. McGraw-Hill, New York. p. 17, May 4, [ENR, 9/9/1996] : Engineering News Record. High-Strength Mix Tested. McGraw-Hill, New York. p. 21, September 9, [Groton, 1997] : Groton, James. ADR in the Construction Industry. Dispute Resolution Journal Vol. 52 (3) pp , Summer, [Hoffman, 1999 ] : Hoffman Construction, (1999), Downloaded from the web on April 11, [Hunter et al., 1995] : Hunter Keith, and Hoening, James. Construction Dispute Prevention Comes of Age. Dispute Resolution Journal pp , January [Larson et al., 1997] : Larson, Erik, and Drexel, John, (1997). Barriers to Project Management: Report from the Firing Line. Project Engineering. Vol. 28 (1) pp March [Miles, 1996] : Miles, Robert. Twenty-First Century Partnering and the Role of ADR. Journal of Management in Engineering Vol. 12 (3) pp May/June 1996 [Peña-Mora et al, 2002] : Peña-Mora, F., Sosa, C., and McCone, S. Introduction to Construction Dispute Resolution. Prentice Hall, New Jersey, [Thompson et al., 1998] :Thompson, Paul J. and Sanders, Steve. Partnering Continuum. Journal of Management in Engineering. Vol. 14 (5). September/October 1998.