Avoidance of Delay in Resolution of Disputes in Construction Contracts 

Dr. Vandana Bhatt*   
 

INTRODUCTION 

Delay in any process could be attributable to two vital factors. 

1. Weakness in system for expeditious result. 

2. Inability of parties to accelerate the process. 

The former can be attributable to legal procedures, which may be reviewed for speed in disposal of ADR. While the second cause may need training in salient aspects of causes of construction delays. 

In fact we need to develop ability to analyse delay without delay. As we know ICA has keenly worked to. have appropriate laws enacted including amendment to CPC. This will go long way to avoid procedural delays. However 1 could deal with relatively modem tool of Artificial Intelligence through computer to avoid delay in analysing facts and correlate to appropriate law to cut down time in ADR procedures. 

Use of computer offers A.I. programmes to help parties and forum to analyse facts in logical manner and to have these facts streamlined with appropriate laws. 1 should indicate one such programme I have developed. 

Before 1 introduce this tool, let us admit that the ADR forum needs to have fairly good knowledge of problems of construction and relevant substantive law of the country. It is therefore necessary to involve technical and legal experts for development of such a tool. 

To begin, let me see why do we have disputes in. construction? To see that let us look at an era when we had no disputes. The accompanying chart tells its own story. 
 

Now that we have no control on falling value of money, let us develop skills to save Time Overrun. Proper Project Management and proper knowledge of sources of delays can do this. As my AI programme is based on most common cause of delay in construction called Differing Site Conditions Claims 1 shall rush through briefly some aspects of Construction Claims. 

Claims are known to arise from following sources. 
 
 
 

SOURCES OF CLAIMS 

DOCUMENTS: Tender form & notice Inviting Tender. Forwarding letter from contractor. Letter of Intent. Drawing/specifications Discrepancies. Bill of quantities. Inconsistencies. 

EXECUTION: Satisfaction of Supervision. Changed conditions. Variations, Alterations. Damages, to works, Suspension. 

PAYMENT: Valuation of contract work. Valuation of changes. Variation in quantities at different rates. Claims for extra time spent. Delay in payment. 

TIME: Suspensions. Delay in issue of drawings, Instructions. Delay due to errors in Design. Delay in issue of materials. Orders to accelerate. 

DEFAULTS: Liquidated Damages. Non-payment of incentives. Recession of contract. Frustration of Contract. 
 
 
 

BROAD TYPES OF CLAIMS 

However if we rescan the above areas they fall under three major areas on execution of contract and two on administration of contract. 
 
 

EXECUTION OF CONTRACT 

Changes / Extra Items / Variations. Differing Site Conditions. 

Delays and its consequences. 
 
 

ADMINISTRATION OF CONTRACT 

Payment of dues. 

Closure of contract / termination losses. 
 
 
 

CAUSES FOR DELAY 

However for the subject of this paper, it will be proper to restrict our inquiry to the two agencies who are parties to contract viz. the owner and the contractor. 

Between these two, delay can occur due to various causes such as, 

•  Defects in documents/design/decision. 
 
•  Incompetence of parties to cope up with changes. 
 
•  Difrering site conditions. 
 
•  Attitude of any one or both the parties. 

 
 

TYPES OF DELAY 

• Excusable and non-excusable delay. 
 
• Critical and non-critical delay. 
 
• Concurrent delay. 

 
 

EXCUSABLE AND NON-EXCUSABLE DELAY 

Contract lays down areas of obligations. Failures to meet obligations, give rise to the other party to excuse or not to excuse the delay. The consideration to excuse would be, 
 

•  Non-foreseeable situation. 

•  Non-critical in impact. 

•  Concurrent with party's delay. 

 In general the most common Non Excusable delays are caused due to following causes, 

 Ordinary and foreseeable weather conditions. 
 

•  A subcontractor's delays. 

•  The contractor's failure to adequately manage and coordinate the project site. 

•  The contractor's financing problems. 

•  The contractor's failure to mobilize quickly enough. 

•  Delay by the contractor in obtaining materials. 

•  Poor workmanship. 

 
 

Excusable Delays could be as follows: 
 

•  Labour disputes. 

•  Fire. 

•  Unusual delay in deliveries. 

•  Unavoidable delays. 

 

 Compensable delays. 
 

•  Unforeseen delays in transportation. 

•  Other causes beyond'the contractor's control". 

 
 

CRITICAL AND NON-CRITICAL DELAYS 

There could be delay in some part of total performance stipulated as contract obligation. However all delays may not upset total Time frame of the, contract and may not be of critical nature. However, there are delays may be small but go to upset the time frame and could be designated as critical. 
 
 

CONCURRENT DELAYS 

While one party undergoes a phase of delay of its own making, the other party too is delayed not because of delay on other side but due to its own deficiencies, such delay is of concurrent nature and is excusable. 

Thus a Non critical, Concurrent delay is Excusable and therefore what gives rise to claim for damages is Critical, Non Excusable, Non Concurrent delay. 
 
 

EFFECT OF DELAYS 

Survey results of Professionals, Contractors, and Owners have indicated that changes in scope of work have been by far the largest single cause of disputes in Construction. When we examine claims in disputes, the largest aggregate amount is linked to changes in Time, Methodology, Specifications, and Site-conditions. 

If we examine keenly the one single cause, it could be dispute about what Owners seemingly or actually promised and.what turned out to be during execution. These disputes are called Differing Site Conditions claims or shortly DSC claims. 

All claims need to be solved on facts and law. Before one applies law, facts need to be streamed line through logical questions-answers. To day, one can resort to Artificial Intelligence borrowed from experts in Construction and Law. 

I have made such an attempt for DSC claims. Various types of claims can be put to this exercise to develop tools of Artificial Intelligence to help Engineers and Lawyers including Judges to resolve construction disputes. 
 
 

PROPOSED ANALYTICAL TOOL/ FLOW CHART APPROACH ARTIFICIAL INTELLIGENCE 
 

FLOW CHART APPROACH 

It is suggested that for various types of claims, system for guiding analysis for claims could be worked out. In developed countries they use "Expert Systems" for such work. These expert systems have input by recognised experts in.the field to solve problems. This. system can be used for guiding field staff in handling various types of potential claims. 
 

DIFFERING SITE CONDITIONS CLAIMS AS SUBJECT 

The most risky latent condition in construction is the unknown sub-surface. The claims arising out of this situation are called "Differing Site Conditions (or D. S. C.). There are two types of DSC claims. 

TYPE-I: The subsurface or latent physical conditions at the site differ materially from those shown in contract. 

TYPE-II: Contractor encounters unknown or unusual physical condition differing materially from those ordinarily encountered. 

There has been increasing smart moves on both sides to beat the risk. Owners progressively disown risk of site conditions and contractors load their offers due to uncertain risk. It is fair that the risk be evaluated properly. Contractors should be asked to quote for reasonably foreseeable situation and in event of change to anticipated conditions, an equitable adjustment in price has to be available. This guidance system is part of Artificial Intelligence and would work as follows. 
 
 

USE OF TOOL 

To give assistance to field staff to manage DSC claims at their level by 
 

•  Providing Pre-legal analysis of DSC Claims. 

•  Providing tool for documentation of all necessary information. 

•  Training concerned staff with process of legal reasoning. 

 
 

QUESTION ANSWERS LOGIC 

A programme can be a series of questions with choice of answers to lead to conclusion. After consultation is over, a Database of cases with similar characteristics can be used for completing the Logical conclusions. Short summery of similar situation can be displayed. To site the degree of consultancy required in case' of DSC let us examine probable questions each of which could have a few probable different answers like YES, NO, WRITTEN, VERBAL, etc. 

1. Has contractor accepted payment as per contract? 

2. Did contractor inform Owners about DSC? 

3. Was information given before or after the identification of DSC? 

4. Did owner investigate DSC? 

5. Would NOTICE to owner make difference? 

6. Could owner have less expensive alternative? 

7. Is DSC related to work area? 

8. Is DSC substantially "Different' from indication in contract? 

9. Did DSC increase contractors' cost',? 

10. Did contractor utilize proper method to overcome effect of DSC? 

11. Is DSC compared to provisions in contract? 

12. Was there an ambiguity or inconsistency in reference and description? 

13. Would a "Prudent' contractor anticipate such a DSC? 

14. Is there a clause to disown liability of DSC? 

15. How specific is such a clause? 

16. Should a reasonable inspection reveal a DSC? 

17. Did any act of owner hinder such a site inspection? 
 

Prudent contractor is an average contractor defined as follows: 

"If most of contractors with similar laiowledge and experience would agree with his judgment under the same circumstances, he is called Prudent Cotitractor". 
 

• Prudent Contractor would, 

• use his past experience/knowledge for his bid. 

• act as most would do in the same circumstances. 

• interpret Contract document and site inspection, as most would do. 

• make assumptions the way most of his expedence/knowledge would make. 

OTHER RELEVANT PARAMETERS 

In answers to earlier questions following attention has to be paid. 

Payment: If received without demur indicated no special effort was necessary to justify a DSC claim. 

Notice: Has three important aspects (1) WHO (2) WHEN (3) HOW. 

WHO - was authorized by owners'to receive notice? This would have to be looked into contract 

WHEN - It is important that contractor informs owners before the site is disturbed. 

HOW - Whether notice was part of minutes, a written letter or simply oral? 

Notice serves important purpose to protect owner's interest against possible future losses. 

FORCE MAJEURE: Dose not affects DSC claims. 

EXTRA COST: Extra/increased cost must have direct relation to unanticipated DSC. 
 
 

MANUAL USE OF FLOW CHART 

The flow chart developed can be used to evaluate the route on which the case could go while reaching END. It is with the route traveled down the inquiry that is related to the chances of success and further, certain routes have better chances to win a DSC claim while some routes have even chances. Such an attempt has been made and this tool though almost certainly would serve purpose of documentation related to DSC, its use to evaluate chances need be tested in field. The success percentage has been assigned on the basis of actual case studies compared with results. Wherever the percentage shown is 50% the success would depend on advantage of documentation and presentation. The answers gathered through such questioning as stated before could be also related to expert system through an appropriate programme to give us access to actually closely related similar situation. 
 
 

CONCLUSION 

An A.I based computer programme to go through,Questions-Answers logic linked to data bank of relevant case laws to appreciate likely outcome. This toot can be developed for computation of claims, documentations and decision-making as well as for strategies to argue claims. 

Early resolution of disputes in Construction is a must for all concerned in view of fast erosion in value of money. 
The constriction Disputes Resolution needs a rare combination of legal and engineering talent. This being so rare that we must develop tools of Artificial Intelligence for Computers to assist Arbitrators for expeditious disposal of the disputes. Construction industry in extensive interaction with Law-experts can help us to develop such tools. I placed before you my modest effort at this.