C onflicts, C laims & D ispute F ramework A Study of DRB Process & Cost Savings From An Owner’s Perspective 10 th Annual DRBF Meeting & Conference - Orlando Carol Menassa October 7, 2006 Feniosky Peña-Mora PhD Candidate in Construction Management, Dept. of Civil & Environmental Eng. Masters of Science in Financial Engineering Student, College of Business Student, College of Business University of Illinois At Urbana Champaign Professor of Construction Management & Information Technology Dept. of Civil & Environmental Eng. University of Illinois at Urbana Champaign C DC D2

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 2 Outline Background Research Objectives Research Methodology Preliminary Model Acknowledgements

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 3 Distribution Per Country 1184 Projects – 95 % 53 Projects – 5 % Total Construction Volume ( ): $89.74 Billion US Other Countries Construction Volume ($ Billion) Total Number of Projects ( ): 1237 US Other Countries Number of Projects $54.17 Billion 60 % $35.58 Billion 40 %

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 4 Distribution by States Total Number of States with DRB: 32 Most projects are Federal, State or City Funded

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 5 Construction Value of Projects - US Construction Value ($ Million) No. of Projects Total Number of Projects in the US: %16.9 %2.1 %3.7 %1.9 %2 %2.2 %

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 6 Number of US Projects with DRB per Year

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 7 Number of Projects per Type Building – 151 Projects (13 %) Highway – 876 Projects (74 %) Tunnel – 157 Projects (11 %)

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 8 Distribution by Construction Type - USA

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 9 Number of Disputes Heard & Settled Heard Settled %

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 10 Disputes Heard per Construction Value Average Number of Disputes Heard per Project

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 11 Disputes Settled per Construction Value Rate of Settlement 98 %99 %97.5 %85.3 %94 %97 %100 %

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 12 Disputes Heard per Project Type Project TypeDisputes HeardAverage / ProjectDisputes SettledRate Building (151) % Highway (876) % Tunnel (157) %

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 13 Other Benefits of DRB Process ContractorPeriod No. of Projects Total Amount Disputes Heard Disputes Settled $ 492 M $ 495 M $ 523 M $ 486 M $ 115 M $468 M $ 293 M $ 110 M $ 322 M $ 232 M $ 128 M33 Repeat Business for Contractors working on CALTRAN projects Table shows breakdown by total number of projects per contractor Table shows only contractors with more than 5 projects

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 14 Outline Background Research Objectives Research Methodology Preliminary Model Acknowledgements

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 15 Research Objectives Develop a model to allow project owners to predict the outcome of the DRB process prior to initiation of project construction Such a model will equip owners with better confidence to apply DRB in their construction project

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 16 Outline Background Research Objectives Research Methodology Preliminary Model Acknowledgements

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 17 Research Methodology Identify a personality conflict style of DRB participants (Ex: Thomas Killman Conflict Mode Instrument)  Competitive Style  Avoiding Style  Compromising Style  Collaborating Style  Accommodating Style Collect data from DRBF database on DRB process  How it works?  Where it works?  What is the outcome? Classify styles of handling conflict into 2 basic dimensions:  Concern for results per conflict  Concern for satisfying other party’s interest Measure the effectiveness of the DRB process in handling the conflict by looking at how the initial positions of the participants changes in the Conflict Grid

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 18 COMPETITION Win-lose power struggles are fought out, decided by the powerful, or through arbitration PROBLEM-SOLVING (Collaboration) A process used to assess several points of view and alternatives. Solutions involve meeting the minimum. ACCOMMODATION Disagreements are smoothed over so that harmony is maintained - one party gives into another. COMPROMISE Compromise, bargaining, & middle-ground positions are accepted. “Divide the pie,” win- win is not possible. Win lose would cause negative repercussions. AVOIDANCE DENIAL Neutrality is maintained at all costs. Withdrawal from the situation relieves the necessity for dealing with conflict Concern for results/conflict Concern for satisfying other parties Research Methodology The Conflict Grid Initial Position of Owner Final Positions of Owner & Contractor Initial Position of Contractor

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 19 Data Collection  Prepare a survey as follows: Collect data on the conflict positions of the participants prior to DRB involvement How did the DRB involvement change these positions into common ground interests Level of satisfaction from the DRB process to both parties To measure effectiveness of the DRB, look at the following issues for each conflict: Conflict resolved Conflict escalated Relationship between participants: maintained/deteriorated Inaction Further disagreement – Other issues emerged Conflict reduction

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 20 Outline Background Research Objectives Research Methodology Preliminary Model Acknowledgements

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 21 Preliminary Model Level of Conflict Demand for DRB Process Effectiveness of DRB Concern for Satisfying other Parties Concern for Results per Conflict Project Participants Personality Conflict Styles Conflict Score Construction Process Contractual Arrangement Construction Experts Legal Experts  Experience / Training  Knowledge / Education  Standing in the Construction Industry / Reputation  Knowledge of Law  Knowledge of Claims  Ability to render fair & Impartial Decisions/Degree of bias Perceived Fairness  Choice in the selection of the panel members  Right to reject panel members  Right to tell one’s own story about the conflict  Neutral Party’s attention to procedural issues  Fairness: Consistency/Suppression of bias/Accuracy/Ethical Behavior

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 22 Outline Background Research Objectives Research Methodology Preliminary Model Acknowledgements

Conflicts, Claims and Dispute Resolution Framework University of Illinois at Urbana-Champaign 23 Acknowledgments The presented work is based on data received from DRBF. The presenters gratefully acknowledge the help of Mr. Lawrence Delmore in providing the required data for this research. Any opinions, findings, conclusions, and recommendations expressed in this presentation are those of the presenters and do not necessarily reflect the views of the DRBF.