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 Conflict Management Plan

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Definitions WHAT Assessing Susceptibility of Each Project to Conflicts and Gravity of the Conflicts Developing Cost Effective Ways for Conflict Avoidance and Dispute Control Presenting Complete, Unbiased and Unanimous Plans WHO Owner, Owner’s Representatives, Designers, Lawyers, Contractors WHY Responsibility Allocation and Reduction of Court Proceedings HOW Identify the Potential Sources of Conflict Analyze the Severity and the Impacts of Conflicts Match the Conflict with a Corresponding DART Draft Plan, Review and Revise it Continuously

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Case Study : Brock’s Plans Real Estate Development (Family Business): Mainly Department and Retail Stores Projects (US$1 to US$10 Million) No Previous Experience in Hotel Development Business US$20,000 Million Hotel Development Project Funding Provided by Developer and Banks Excellent Reputation and Willingness of Banks to Finance Negotiated Cost Basis, Plus Fee Equal to 3.5% of Total Construction Costs Completion of 90% of Design at Contract Award

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Case Study : Kelly’s Plans Senior Procurement Officer for the State Aviation Administration US$1.5 Billion Fast-Tracked Capital Improvement Program : 19 Contracts (US$20 Million - US$ 400 Million) Interdependent Schedules and Overlapping of Design and Construction Phases Fixed Price, Design-Bid-Build Projects, Operation and Maintenance

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Important Issues How Should Kelly and Brock Go About Planning to Identify, Avoid, Monitor and Control Any Potential Conflict? How Should Brock’s Approach Differ From Kelly’s Approach? Could These Both Use the Same Methodology? Are There Restrictions on What Dart Each of Them Could Use?

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline  Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Conflict Management Process Objective Look at Each Project Individually Assess How Much Conflict You Will Encounter Assess How Severe Is the Conflict Present Cost Effective Ways to Avoid Conflicts Mitigate Impact of Conflict Resolve Disputes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Common Steps Conflict Analysis Conflict Identification Design and Implement Conflict Management Monitor and Review Plan Peña-Mora,et.al,2002

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Conflict Space The Conflict Management Plan Should be Able to Handle at the Same Time The Cumulative Effect of Conflicts Throughout the Project Life Cycle The Different Conflicts at Different Stages of the Dispute Resolution Ladder at a Specific Time

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Conflict Space Peña-Mora,et.al,2002

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process  Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Identifying Possible Conflicts Review of the Common Sources of Conflict Peña-Mora,et.al,2002

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts  Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Effect of Delivery System on Identifying Conflicts Identify the Potential Conflicts that Need to be Avoided Select a Delivery System that Minimizes Such Conflicts

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Example: Selection of a Delivery System Stephenson (1996) Establish a Detailed List of Potential Conflicts Based on Historical Data or Personal Experience Identify the Relationships Between the Participants (For Ex, Owner-CM, Owner-Designer) For Each Delivery System, Match the Potential Conflict with the Concerned Relationships and Give it a Specific Number of Points Add up the Total Number of Points for Each Delivery System and Choose the Best Approach

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts  Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Analyzing Identified Conflicts Probability of Occurrence of Conflicts Impact of Potential Conflicts on Project

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Examples Probability of Occurrence of Conflicts Assume that the Identified Sources of Conflict Are Misunderstandings, Unrealistic Expectations and Poor Communication, Compare the Two Cases: –Case 1 : Owner and Contractor With Previous Experience Together, in the Same Geographic Region –Case 2 : Owner Venturing into a Neighboring Country and Working with an Unfamiliar Contractor Impact of Potential Conflicts on Project Two Similar Projects With Introduction of Design Change Halfway Through Construction –Project 1 : Design-Bid-Build Approach –Project 2 : Design-Build Approach

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts  Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Probability of Occurrence Organizational Issues Uncertainty

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Organizational Issues Structure Conflict: Example: Contract Terms Case 1 : Fair and Reasonable Allocation of Risk  Low Probability Case 2: Unfair, Unreasonable Allocation of Risk  High Probability Process Conflict: Example: Performance and Quality Case 1: Cost-Plus, Quality Driven Projects, Inspection Staff  Low Probability Case 2:Competitive Bids Award to Lowest Bidder, Bad Reputation  High Probability People Conflict: Example: Management Case 1 : Long Distinguish Solid Managers  Low Probability Case 2 : Inexperienced Participants  High Probability

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Uncertainty External Uncertainty : Example: Political Risks Case 1 : Stable, Well Developed Governments  Low Probability Case 2 : Afghanistan During the Soviet Invasion Throughout the 1980’s  High Probability Internal Uncertainty : Example : Unforeseen Site Conditions Case 1 : Open, Above Ground Projects with Adequate Investigation  Low Probability Case 2 : Lack of Subsurface Investigation for All Participants  High Probability

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence  Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Impact of Conflict Quantification Tools Historical Data Experience and Knowledge Example Weather: Low Impact in Construction ‘ Friendly’ Environment and High Impact in Areas Prone to Natural Disasters

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict  Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Combined Conflict Exposure Step 1 : Calculate Conflict Exposure=P(C)x L(C) Where: P(C) Is the Probability of Occurrence L(C) Is the Impact of Occurrence Step 2: Group Conflicts Into Priority Levels: Group A : 10-20% of the Top Conflicts Accounting for Roughly 60% or More of the Total Potential Impact Group B : Conflicts not in A or B Group C : Large % of the Bottom Conflicts Accounting for 10% or Less of the Total Potential Impact

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Example: $200 M Project Risk Exposure: P(c) x L(c) Project (no mitigation strategy) Large Problem P(c)=0.10 L(C)=$25 M Medium Problem P(c)=0.20 L(C)=$5 M Small Problem P(c)=0.70 L(C)=$1 M 2.5 M 1 M 0.7 M 10.5 M

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure  Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Designing the Management Plan Prioritize The Sources Of Conflict. Implement Dart To Avoid/prevent Conflict Using Techniques In Stage 1 And Partnering. Implement Dart To Resolve Conflict, Using Techniques In Stages 2 Through 5. Identify Each Participant’s Role. Perform A Cost/benefit Analysis Of The Conflict Management Plan. Develop A Contingency Plan. Review With All Participants And Update As Necessary.

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan  Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Prioritizing and DART Implementation

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation  Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Identification: Who Is Responsible? Agreement on Allocating the Responsibility for Conflicts Through Contract Clauses In Conflict Management Plan Eliminating Confusion Between Clauses and Management Plan

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible?  Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Cost/Benefit Issues Partnering P(c) = 0.10 Large Problem L(c) = $ 25 M P(c) = 0.20 Medium Problem L(c) = $ 5 M P(c) = 0.70 Small Problem L(c) = $ 1M Yes No P(c) = 0.40 Large Problem L(c) = $ 25 M P(c) = 0.50 Medium Problem L(c) = $ 5 M P(c) = 0.20 Minor Problems L(c) = $ 1 M Risk Exposure P(c) x L(c) 0.1 x 25 = 2.5 M 0.2 x 5 = 1 M 0.7 x 1 = 7 M 0.4 x 25 = 10 M 0.5 x 5 = 2.5 M 0.1 x 1 = 1 M = 10.5 M = 13.5 M

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues  Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Contingency Plan List of Options of Both Parties Strengths and Weaknesses of Conflict Management Plan Identification of Areas Where No Conflict Mitigation Plan is Implemented Backup in Case of the Unpredictable (Mainly Litigation) : “What If?” Process

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan  Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Computer Applications Peña-Mora,et.al,2002

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications  Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Importance of Review Importance of Review and Acceptance of the Plan by All the Parties Objective of Review at Various Stages of Project Life Cycle : Inform All the Parties and Make Them Partners in the Process

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review  Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Conflict Resolution Indexes Peña-Mora et al., 2001

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Review Process Peña-Mora et al., 2001

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Outline Conflict Management Process Identifying Possible Conflicts Effect of Delivery System on Identifying Conflicts Analyzing Identified Conflicts Probability of Occurrence Impact of Conflict Combined Conflict Exposure Designing the Management Plan Prioritizing and DART Implementation Identification : Who Is Responsible? Cost/Benefit Issues Contingency Plan Computer Applications Importance of Review Conflict Resolution Indexes

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Kelly’s Plan

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Brock’s Plan

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al Summary Conflict Management Plan Vital Step in Construction Projects Often Overlooked Conceived in the Planning Phase and Reviewed Throughout Project Life Cycle Identifying Conflicts and Analyzing Their Impacts Prioritizing Conflicts Application of Dispute Avoidance Techniques Design of a Resolution Procedure Allocation of Risks Between Participants

Introduction to Construction Dispute Resolution Chapter 10: Conflict Management Plan © Peña-Mora, et. al References [Pena-Mora et al., 2001] : Pena-Mora, Feniosky and Tamaki, Tadatsugu (2001). Effect of Delivery Systems on Collaborative Negotiations for Large-Scale Infrastructure. ASCE Journal of Management in Engineering, Vol. 17 (2), April [Peña-Mora et al, 2002] : Peña-Mora, F., Sosa, C., and McCone, S. Introduction to Construction Dispute Resolution. Prentice Hall, New Jersey, 2002 [Stephenson, 1996] : Stephenson, R. (1996). Project Partnering for the Design and Construction Industry. Wiley. New York Pfleeger, Shari Lawrence. Software engineering: Theory and Practice. Upper Saddle River, NJ. Prentice Hall Jalote, P. An integrated approach to software engineering. New York. Springer Braude, Eric J. Software engineering: An object-oriented perspective. New York. Wiley