Claims and Disputes in Construction Industry, Essay Example

Introduction

The construction industry plays an essential role within the economy for several developed and developing countries. In most developing countries, the construction activities account for over 10 percent of their GDP, 80 percent of the total capital assets, and over 50 percent of the invested wealth in fixed assets. (World Bank, 2012) The construction industry is spread in diverse fields through the economic sector where it plays a central role in the development of countries infrastructures, national development, and other public facilities. The value of the construction industry is weighted in the production output, the number of individuals employed, and introduction of new innovations. (Oke, Ogunsemi, 2008) After agriculture, construction provides the largest employment opportunity, which contributes significantly to the economy. (Office of National Statistics, 2013) The construction industry over the last decade has taken a major hit due to the recession, however within the US economy there have been trends of a slow and steady upwards growth in new construction projects. (Guerin, 2012) However, the construction industry is plagued with problems that persist throughout most projects that account for the number of increased claims and disputes.

Project management has become a well-developed accepted domain with the ability to exercise a precise level of expertise in different fields and industries. Project management has improved industries with developments that involve human aspects and interactions of maintaining projects with communications, organization, planning, reporting and the controlling of the project scope, among other factors. (Abu Bakar, Razak, Karim, Yusof, Modifa, 2011) The increase in project management within different industries in the economy has propelled the methodologies of project management in projects. Project management is designed to ease the strains of the construction projects that are crippled with being over-budget, scope creep (delays), late, and poor communication that leads to a high volume of claims and disputes in construction contracts. (Abu Bakar, et. al, 2011) Claims and disputes can be costly and expensive, and in certain times can be inevitable to construction projects. Within the construction industry there has been a growing frustration and dissatisfaction with methods in construction claims and disputes, which is caused by several factors throughout the project. (Bayraktar, Arif, Hastak, Gad 2012) However, the role of project management is to cover all aspects of managing projects from the inception to completion. (Abu Bakar, et.al, 2011)

Project management provides the variety of techniques, systems, tools, and methodologies needed to address the issues that will arise within projects to keep threats to a minimum. This research is significant because the construction industry impacts several sectors of the economy that affect GDP, employment, and the development of national infrastructures. (Lopes, Oliveira, Abreu, 2011) The need for completing projects on the defined timeline is essential to providing developments in a timely matter that aid in several areas of sustainable development for future generations. Claims and disputes not only harm the construction industry, but all the parties involved, and more importantly spill over to the consumers. (Cushman et al, 2001)

Statement of the Problem

Within the last few decades, the construction industry has been notorious for the increase in claims and disputes, as projects are plagued by project issues caused by numerous issues. (Hanna, 2007) Disputes, and claims are unavoidable and inevitable within the construction industry, however the increase has resulted in more involvement from lawyers and other external sources. (Hanna, 2007). Little research has been conducted on the role of project management utilization of its tools and methodologies in order to find resolutions to major problems within the construction industry. (Abu Bakar, et.al, 2011) Most research has been conducted several decades ago, Munns, Bjeirmi, (1996), Levin (1998) on project management. The resolutions that are used by project managers can help construction projects, as illustrated in research conducted by Chong (2011), and Ohlendorf (2001) that each studied the conflict within project teams. However, there is not enough recent research that incorporates the importance of project management in claims and disputes resolution within the construction industry. A number of factors contribute to the persistent problems of conflict that arise from claims and disputes between clients and contractors. These problems can cause irreparable damage, which could potentially harm the project, and the company. (Ogunbayo, 2013) The damages could be detrimental if resolutions to work out the issues are resolved. Project management plays a central role in managing projects, which include, scope, scheduling, threats, and risks.

Project managers have to adapt to different project environment, which call on experience and knowledge of the various impacts to projects. In their roles and responsibilities, project managers must be able to pinpoint the central causes to disputes and claims, and find ways in which they can be resolved without deterring the project. (Johansson, 2012) The construction industry is known for a high level of disputes and claims, they have also become more abundant in developing and seeking methods of resolutions in order to quickly solve the problems.(Hanna, 2007) With the implementation of more project management structures in the industry, the measure of the success of the project can be coupled with the role and responsibilities of the project manager.(Ogunbayo, 2013) The project manager’s approach to effectively and efficiently resolving conflicts within the projects. This can be better understood through additional research that intends to be used in showing the importance of project management mechanisms in finding resolutions for disputes and claims in the construction industry.

Purpose of the Study:Research Questions

Construction projects can become complicated and require a systematic approach in order to properly function in order to be completed by the deadline. Project management exists in order to maintain that projects run effectively and efficiently for the benefit of the company and the client. (Ogunyabo, 2013) Project managers are faced with changing environments in which the role and function within the organization cause a gradual shift in focus. For project managers to maintain their competency in their professionalism, they have to rely on the knowledge and skills in which they obtained through their developed tools and methodologies in risk and conflict management to find solutions. Thus, this research is intended to provide a better understanding of the two.

This dissertation will draw on a combination of several methodological approaches which include, close textual analysis of primary source material gathered from the construction industry insiders, and databases. This research will combine exploratory and descriptive research on project management and the causes and resolutions of claims and disputes in the construction industry. In order to address the objectives of the research, the dissertation takes a multi-method research strategy that combines qualitative research from a naturalist ontology. This framework includes characteristics of qualitative and quantitative methods, inductive analysis, and grounded theory of the relevance of project management in claims and dispute resolutions in the construction industry. Interviews are the main source of data-gathering method. Field research will be useful in gaining firsthand knowledge of project management in the construction industry using qualitative approach with construction companies within the community. At least 50 experts in fields such as Architects, Builders, Quantity Surveyors, Structural Engineers, Mechanical Engineers, Electrical Engineers and Estate Surveyors through email, mail, and in-person surveys.

Hypotheses

The claims and disputes have shown to be an increasing problem and the presence of project managers is essential in getting projects back on track. Project managers’ response to the problems are dependent on their use of different methodologies used in resolution.

H1₀. There is statistically significant difference in the use of project manager’s different methodologies on resolving claims and disputes in the construction industry.

H1_a. There is statistically significant difference in the amount of claims and disputes resolved by project managers in the construction industry.

Quantitative:

Q1. Do project managers use conflict management to resolve claims and disputes?

Q2, Do project managers use mediation as solution to resolve claims and disputes?

Q3. Do project managers integrate risk management in an attempt to avoid potential claims and disputes?

Q4. Is the use of project managers effective within projects?

Q5. Does the use of project management methodologies make a difference in disputes?

Q6. Does the use of project management methodologies make a difference in claims?

Qualitative:

Q1. Are project managers aware of the claims and disputes in the construction industry?

Q2. Is claims and disputes a major problem within the line of work?

Q3. What are the different types of methodologies used by project managers to resolve claims and disputes?

Q4. Does the use of the project methodologies make a difference in the amount of claims and disputes?

Q5. Is conflict management essential to resolving claims and disputes?

Q6. Is mediation essential in resolving claims and disputes?