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 Case Study: Tren Urbano Project

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Definitions WHAT Light Rail Transit Line in San Juan, Puerto Rico Completion of the First Phase by November 2001 at a Cost of $1.5 Billion WHO Puerto Rico’s Department of Transportation and Public Works (DTPW) Parsons DeLeuw, Inc Federal Transit Administration (FTA) Siemens Transit Team US Partners : Daniel, Mann, Johnson and Mendenhall (DMJM) and Frederic R.Harris, Inc Local Partners: Eduardo Molinary and Associates (Architects), Barret and Hale and Associates (Consulting Engineers) WHY Real-Life Application of DART HOW Understand Project Circumstances Identify and Analyze Potential Conflicts Design Conflict Management Plan Review and Revise the Plan Based on Project Data

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline  Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Tren Urbano Project Story 1989: Conceptual Design of Tren Urbano January 1993: Review of Developed Concept by a New Executive Team February 1993: Tren Urbano Designated as One of the Four Turnkey Demonstration Projects in the Nation January 1994: Submittal of Successful Bid for Federal Assistance to the US Congress April 1994:$42-Million Contract for GMAEC Services Between DTPW and Joint Venture

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Tren Urbano Project Story Tren Urbano Office (TUO): Planning and Environmental Permitting Process, Partial Plans and Systems Specifications, Structuring Procurement Process November 1995: Approval on Publication of Final Environmental Impact Statement (FEIS) February 1996: FTA’s Approval on FEIS and Record of Decision March 1996:$307.5 million Full Funding Grant Agreement Between DTPW/HTA and FTA August 2, 1996: Groundbreaking for Phase I Alignment

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story  Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Project Description

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Phase I Alignment

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description  Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Procurement Strategy Phase I Project Divided into Six Design/Build Contracts for Civil Structures and One System and Test Track Turnkey (STTT) Contract STTT Contract Construction of Two Stations and 2.6 Km of Test Track, Maintenance and Storage Facility, Operations and Control Center Delivery of train Vehicles and Systems Systems Integration System Operations and Maintenance for a Minimum of Five Years

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Tren Urbano Hybrid Approach Types of ProcurementPartyAlso referred to as 1212 Turnkey DBOT Siemens Transit Team (STT) Turnkey Contractor 3 Construction Management (at no risk) GMAECOwner’s Consultants 4545 Multiple Primes Design-Build Alignment Section Contractors (ASC) Civil Contractors

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Organizational Chart

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano  Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Partnering Objectives Promotion of Working Relationships Among Participants Promotion of Cooperation and Trust Achievement of Common and Individual Objectives on a Non-confrontational Basis Initial and Periodical Follow-up Workshops Facilitators Retained Though the Partnering Program of the American Arbitration Association

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering  Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Change Order Process

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process  Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Negotiation Steps The Contractor Asserting a Claim if not Satisfied with the Outcome of the Change Order Five Negotiation Steps Before a Claim Becomes a Dispute Technical Personnel of the Parties Attempting to Resolve Claims in the Partnering Sessions With Impartiality (At Most 60 Days) Claim Submitted to Contractor’s Project Manager and Contracting Officer (At Most 10 Days) Claim Referred to Contractor’s Project Executive and Executive Director (At Most 10 Days) Claim Determination Submitted within 10 Days by the Contracting Officer to Contractor Notice of Disagreement Submitted Within 10 Days by the Contractor to the Contracting Office

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Dispute Review Board DRB Consisting of Three Members Each of the Authority and the Contractor Selecting Three Nominees Each of the Parties Selecting One Individual From the Other’s List of Nominees Third Member: Qualified and Impartial Chairperson selected by Mutual Agreement Within 21 Days Foundation of The DRB May Take More Than Two Months

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Processing Disputes Step 1 : Contractor’s Request for Meeting and Supporting Statement Step 2: Authority Submitting to the DBR and Contractor, Response to Dispute and Counterclaims Step 3: Contractor’s Statement Setting Factual and Legal Defense to the Counterclaim Step 4: DRB Setting Date of Initial Meeting on Dispute Step 5: DRB Issuing Draft Findings and Recommendations to Both Parties Step 6: Notification of Miscalculation or Error in the Draft Step 7 : Final Findings and Recommendations Submitted to Executive Director and Contractor Step 8 : Executive Director Issuing A Written Decision to Accept or Reject Recommendations

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Legal Action Court Action Filed By Contractor Within 90 Days After Receipt of the Executive Director’s Decision Negotiation Time Frame 20 Weeks For Claim Resolution Process 6 Months for Dispute Resolution Process

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano  Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Enhance the Pros of Duplication

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Example of Duplication Parsons Brickerhoff (in Siemens Group), Responsible of the Management Functions in Terms of Interface Between Systems to Fixed Facilities and Interface Between Fixed Facilities GMAEC, Owner’s Consultants, Responsible of Schedule and Design Reviews of the ASC’s Work Result: More Complete Review and a Superior Project

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication  Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Form a Unified Management Team

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team  STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al STTT Contractor’s Fiduciary Relationship With Owner Two Contrasting Perceptions of STTT: Owner Representative and Contractor As Owner Representative Operations and Maintenance for 5-10 Years  Reduced Lifecycle Costs. Overseeing the ASC’ s Interface With Each Other & Interface With Systems Reviewing ASC ’s Design & Schedule Partnering With PRHTA/GMAEC As Contractor Design and Construction of Systems and Vehicles (Major Cost Component of STTT Contract) Design and Construction of One Fixed Alignment Section

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner  Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Aid Non-Contractual Relationships ASC ’s Partnering With Owner Improving Costs and Schedule ASC ’ s Partnering with STTT Without Contractual Commitment

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships  Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Improve Communication and Understanding Between the Multi-Cultures Multi-Cultural Environment : Puerto Rican Contract Managers and North American Design Managers (Different Contract Languages, Priorities in Objectives) Multi-Phase Environment: Planning of Next Phases, Design and Construction of Phase I, Preparation for Operation and Maintenance of Phase I Initial Partnering Meetings and Follow-up Meetings

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures  Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Initial Meetings Held Between Owner and Each Party With Whom the Owner Has Signed a Contract 2-3 Day-Meetings in a Neutral Location, Facilitated by a Member of the AAA Objectives Discussions of Risks, Concerns, Goals Development of Trusting Relationships

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Quality Summit Meeting Between All the Parties, Ran By the Tren Urbano Office Results of Observations From Quality Summit Improve Cross-cultural and Communicational Relationships Improve in Drive and Belief in Partnering by Some of the Contractors Need Some Human Infrastructure in a very Compressed Time Lessons Learned from Quality Summit Need for a Third Party Facilitator Focus on Working Together in Small Groups Instead of Numerous Presentations More Interactions Between Parties

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings  Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Follow-up Meetings Monthly Partnering Meetings Between Project Principals Parties Presenting Status Reports and Meetings Run by Owner’s Top Management Issues Resolution at a Micro-Management Level Reduced Now to Quarterly Meetings  Preventing Shortcutting the Regular Resolution Process and Focusing on Partnering Relationship Issues

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Evaluation of Partnering A Clear Champion For Partnering Was not Clearly Identified in the Pre-Planning Stage More Faith and Genuine Commitment Need to Be Elicited in the Partnering Process Follow-up Meetings Could Be Improved if Run by a Third Party More Emphasis Should Be Done on the Need and Value of Partnering Need For More Meetings in an Informal Setting All Management Parties Should Form One United Management Team Partnering At All Levels (Example, in Field Inspection)

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings  General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al General Analysis of Partnering Components Lessons Learned Divided into Three Categories Initial Factors : Set at the Beginning of the Project, Impact Seen at the End of the Project Operational Factors: Occurring Throughout the Project, Affected by Initial Factors Resulting Factors : Product of Other Factors

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Initial Factors Initial Meetings Start Early With a Full Partnering Initialization Don’t Cut on Time and Cost at this Stage Develop Trust Education Use Experienced Employees Educate and Train People Numerous Cultures Recognize Cultural Differences Delivery Method High Commitment to partnering in the Presence of Different Non-contractual Relationships

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Operational Factors Follow-up Partnering Meetings : Maintaining the Initial Trusting Partnering Relationship Knowledge Transfer: Open Communication for Knowledge Transfer Between Various Cultures Evaluations: Soft Measures Such as Problem Solving Methods and Hard Measures Such as Number of Claims Champions for Objectives: Champions for Quality, Cost, schedule and Partnering Benefits of Duplication: Extra Cost Versus Greater Quality-Preventing Adversarial Positions and “All is Responsible, Nobody is” Syndrome Unified Management Team Turnkey Contractor Acting as Part Owner

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Resulting Factors Site Transfer Conflicts: Monitoring Hand-Over Between Contractors in the Absence of Direct Contractual Links Micro-Management: Effective Partnering Saving on the Resources Needed for Micro-Management Claim Management

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components  General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al General Analysis of Conflict Resolution Insights From Interviews Regarding Conflicts in the Rio Piedras Section Conflicts and Disputes Are Inherent to the Construction Industry Owner and Contractor Are Disagreeing Concerning How the Project Is Running Mitigation Actions Are Most Effective if Taken early Managers Have A Lot of Experience Regarding Conflict Management and They Feel Pretty Confident About Their Negotiation Skills Decision-makers Are Not Aware of the Long Term Effects of Their Actions

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Outline Tren Urbano Project Story Project Description Procurement Strategy Conflict Management in Tren Urbano Partnering Change Order Process Dispute Resolution Contract Language Analysis of Tren Urbano Components Partnering Analysis in Tren Urbano Enhance the Pros of Duplication Form a Unified Management Team STTT Contractor’s Fiduciary Relationship With Owner Aid Non-Contractual Relationships Improve Communication and Understanding Between the Multi-Cultures Initial Meetings Follow-up Meetings General Analysis of Partnering Components General Analysis of Conflict Resolution

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al Summary Partnering and the Success of Innovative Delivery Methods in a Global Market Importance of Partnering in Multi-Cultural, Multi- Phase Projects Partnering Embodied in Initial Meetings, Quality Summit, Follow-Up Meetings Conclusions and Recommendations Contract Language Regarding Conflict Resolution Is Not the Source of Problems Inter-phase Conflicts Require Additional efforts

Introduction to Construction Dispute Resolution Chapter 11: Case Study: Tren Urbano Project © Peña-Mora, et. al References [DTOP, 2000] : Puerto Rico’s Department of Transportation and Public Works home page ( (2000). [Harpoth, 1999] : Harpoth, Nina. Effective Partnering in an Innovative Procured, Multi-Cultural Project, MS Thesis. MIT Deaprtment of Civil and Environmental Engineering [Peña-Mora et al, 2002] : Peña-Mora, F., Sosa, C., and McCone, S. Introduction to Construction Dispute Resolution. Prentice Hall, New Jersey, 2002 [Rio Piedras Contract, 1997] : Rio Piedras Design-Build Agreement, Phase I of Tren Urbano, Contract No. AC , Rio Piedras Contract: Alignment Section 7, Puerto Rico Highways and Transportation Authority. [TUI, ] : Tren Urbano Interviews with Project Participants, (1997-8). Tren Urbano Office and Siemens Transit Team Office, San Juan, Puerto Rico. [TUQS, 1997] :Tren Urbano Quality Summit, 10/6/97 & 10/7/97, San Juan, Puerto Rico (1997).