Last week, a colleague of mine (Matt DeVries)posted great information about the cause of construction claims on his blog, Best Practices Construction Law. The post – What Do You Think Causes Construction Claims and Disputes? Think Again. – cites research by the National Cooperative Highway Research Program about the practices and characteristics of contractors and owners that are associated with high incidence of claims.
This post examines some of the reasons why disputes occur, and then looks at what can be used to resolve the disputes.
The Biggest Causes of Construction Disputes Are…
Much of the “practices and characteristics” cited in the report are not surprising. “Excessively narrow interpretation of plans and specifications,” and “Poor planning and use of wrong equipment,” for example, are no-brainers.
Reading through Matt’s list may get you angry because you have likely witnessed owners and contractors engaging in the listed behavior, to no positive conclusion. Two things that irked me were “Mandatory advance notice of claims” and “Attitude and style of contract administrators.”
We have written about both of these issues in the past.
In “Can Owners Disguise No Lien Clauses” we discussed strict interpretation of contract notice provisions and debated whether these are actually a contractual waiver of lien rights. We discussed the role of “tempers” and attitudes in “Getting Paid in the Construction Industry: A War Between Policy, Contract and Tempers.”
These two issues are just the tip of the iceberg, and admittedly, they are a little skewed to my particular subcontractor / supplier-friendly perspective. There are many other causes listed in the NCHRP report that relate to bona fide disputes about real problems on the project, as opposed to the two I highlight which relate to silly technicality arguments and personality conflicts.
Nevertheless, in my years of experience of working with legal disputes in the construction industry, I find that personality and silly technicalities account for a substantial portion of disputes.
The question I’ve asked in my career is this: How to resolve them?
How To Get Leverage And Solve A Construction Dispute
When a subcontractor or material supplier can’t get paid for furnishing labor or materials to a construction project they face a serious problem. The problem they usually face is leverage.
If the project is complete, threatening to discontinue furnishing is not an effective option. They are probably owed a significant amount of money. Every day that passes brings a heightened need for the cash. The owner and prime contractor will actually benefit from making the subcontractor or supplier wait for payment, and they know it.
It may be illegal, or against the contract, or against public policy – it doesn’t matter. The legal system is broken. There are no real consequences.
So how does a subcontractor or supplier resolve the dispute?
Regardless of whether faced with a meritorious dispute or a fabricated bad-faith personality conflict, the answer is always the same: mechanics lien rights.
As explored in the “17 Ways a Mechanics Lien Works To Get You Paid” post and presentation, filing a mechanics lien claim (or a bond claim) has a large number of immediate consequences to the parties and the project. Not every consequence will be relevant to your particular dispute, but at least one or a few of them will be.
That consequence – whichever one it is – will balance the power between the parties. Sometimes, balancing the power and creating a little leverage is the only way to break through on the disputes clogging up a project.