Introduction

Litigation  in the construction industry has become a major impediment to procuring services. Vendors and clients can both spend an exorbitant amount of money trying to settle legal cases but having nothing to show for it in the end.  This is a major problem in the procurement of construction services.

The Problem

Litigation Costs

Saudi Arabia is no different. Currently, over 10,000 projects in the Gulf Region are involved in legal disputes . On top of that, experts have confirmed that the dollar value of these issues in construction contracts (both public and private contractual disputes) amounted to $800 million, which is estimated to be 40% of the state budget. Studies also show that legal disputes in the construction sector in the Middle East take over a year (14.6 months) to resolve. Litigation is a major problem.

Solution Methodology

In order to solve this problem, research was done to do the following:

  1. Find the causes of the litigation
  2. Find potential solutions to minimize disputes
  3. Compare the solutions

Causes of Litigation

After investigation into the causes of litigation in the world, it was identified that the reason for legal disputes could be categorized into three major issues:

  1. Inaccurate expectations
  2. Miscommunication
  3. Incorrect documentation Reasons for litigation

Potential Solutions

After understanding the reasons for these legal disputes, the next step was to find possible solutions to the problem. In the construction industry six different delivery approaches were researched to determine possible solutions for legal disputes. Among the delivery approaches were Design Build (DB), Construction Manager at Risk (CM@R), Integrated Project Delivery (IPD), Alliance Contracting, Private-Public Partnerships (PPP), and Best Value Method (BVM). All of these methods are main stream procurement processes that are considered valuable.

Comparison Results

Summary of issues in construction delivery systems
Type of delivery method Issues of dispute Reference
Design Build ·       Poor communication between architect and contractor creating room for conflict

·       Sophisticated approach; Owner must have clear idea of project concept/scope

·       Inexperience

·       Contentions on responsibilities

·       Unclear clients requirements

Garner et al., 2008

 

Friedlander, n.d

 

Lam et al., 2012

 

Construction Manager at Risk ·       Little collaboration between designer and CM@R firm during design phase

·       Little collaboration between Commissioning Authority and the CM@R firm

Jeelan et al., 2005

 

 

 

Integrated Project Delivery ·       Over reliance on trust and familiarity O’Connor et al., 2009
Alliance Contracting ·       Lack of commitment

·       Independent problem solving

Hampson and Kwok, 1997
Best Value Approach ·       Perceptions of favoritism

·       Subjectivity of performance evaluations

Scott et al., 2006
Public and Private Partnerships ·       Differences in priority criteria, needs and expectations between private and public stakeholders

·       No-disclosure

·       Corruption

·       Procurement irregularities

Takim, 2009

 

 

 

Fombad, 2014

PIPS/PIRMS ·       No Issues were found

Conclusion

Litigation is a worldwide construction issue. Due to the high amount of legal disputes in Saudi Arabia, litigation has become a major concern for the country. In order to solve this issue of litigation, researchers found the causes of litigation in the world, possible solutions, and compared the solutions.

The results showed that every delivery method was shown to have issues in one of these categories (inaccurate expectations, miscommunication, and incorrect documentation), except the BV PIPS/PIRMS. None of the identified issues causing legal disputes was found to occur in the BV PIPS/PIRMS method. The Best Value Approach is the best construction delivery method to minimize litigation (See Legality of BVA)

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Case Study : Factors Causing Litigation in Procurement
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