Mediation in construction and industrial projects

1. Introduction

In order to introduce mediation in the industrial and construction sector, it is necessary to consider the specific context of this specialised kind of projects that have certain specific technical characteristics that make it special in how works are developed, which might lead, therefore, to conflicts.

2. Nature of Conflict Cases in the Industrial and Construction Sector

Even if the nature of these cases could be considered too large as a whole range of conflicts should be explained concerning the abovementioned fields, reality shows that there is an implicit practice in conflict resolution that companies wish to manage more often.

According to our experience, the issues companies mostly wish to solve are those deriving from construction errors, design problems, changes in contract conditions due to changes in agreements reached or to new conditions that were not envisaged by contracts, changes in work plans and payment problems.

Currently, we cannot state to what extent some of the cases are more challenged than others as there are not data enough in Spain to conduct a thorough inquiry. However, the consultation and the mediations carried out can be a valuable foundation of what we believe to be the nature of these cases.

A prestigious study conducted by the King’s College of London called “The Use of Mediation in Construction Conflicts” shows the results of mediation implementation in the industry and construction field between 1999 and 2009. Using its expertise and the data provided by it, three are the kind of cases the Court of Technology and Construction of the United Kingdom knows of are as follows:

• As indicated above, the highest number of cases brought to the before mentioned Court is related to construction defects (or construction vices), 18%, followed by payment issues, 13%, and property damages, 13%, and then design issues, 12%.
• Intuitively, we could say that the cases that use mediation in the industrial and construction sector in Spain are those cases in which conflicts have higher relevance for the UK’s Courts.

3. Mediation’s Methodology in Construction and Industrial Projects

The methodology used by this mediation specialisation is very specific to the sector, and is regulated by the Construction Organic Law, which stipulates the agents in the construction process in order to encourage quality and focusing on the basic requirements and obligations of these agents in the construction process.

The Law considers the responsibilities of all the actors involved in the building process: the owner, developer, project designer, constructor, works manager, implementation director, supplies, control bodies; all actors must comply with the Law, and their relations are linked so that they can create a final product as a result of their individual good action. For this reason, the construction process is a chain process of individual processes that converge in a final element that would hardly exist without them.

A clarifying example: imagine a conflict in a construction company with an external actor such as the work management team, which is, in its turn, the internal actor the project is related to. In this case, the construction company could not work exclusively in mediation with the leading architect of the work, as it should be considered how his relation to the project might affect his business activity.

The procedure used in this special methodology is only used in this kind of projects. Therefore, from the beginning of the process, a multiparty mediation board should be set up.

Multiparty mediation boards

Multiparty Mediation Boards are, therefore, the starting point of the process, and all the mediation processes should include them. Setting them up is initiated at the voluntary request of the parties; currently there are few written contracts including mediation clauses, although this should be the first track the parties take to request a mediation service. Nowadays, the request is submitted by one of the parties and it is either the mediator or the institutions who invites the other party to the informative session to start the process. According to our methodology, the mediation request should implicitly entail a thorough study of the problem in the conflict; as stated above there are several actors involved in the construction process, therefore there will be several actors in entire the process and the mediation board must be shaped and structured from the moment one of the parties makes the consultation.

After estimating how many agents are involved in the conflict, it is worth noting that mediation in constructive projects is a multiparty mediation. The conflict is surely affected by the action of more than two actors; therefore all the parties involved must participate in it, otherwise the solution will not be feasible.

Step-by-step mediation

Also, these projects have another specific condition, which is the existence of a very comprehensive planning of works that is subject to heavy economic penalties in the event the work of one actor stops the project planning as a whole. Mediation must take these concepts into account as timing should be adapted to quickly comply with agreements or step-by-step mediation should be considered to reach partial agreements that do not interrupt the project’s planning.

Renovation of mediation

Third, there is a last differentiating concept linked to the previous ones: consider that mediation never totally ends until the project is completed, as in general an agreement follow-up process is done by the mediators to verify that agreements are complied with. In this case, and according to the specific nature of these cases, mediation can be phased so that it adapts to the fulfilment of the milestones established by the project’s planning; even if the conflict is solved at one of the last steps, it is necessary to think about the last follow-up phase we mentioned above, so, considering how complex these projects are and how the actors that participate in them are linked to each other, usually mediation is restarted at a given moment.

Hence, and as we will see in the next sections, considering Conflict Resolution Boards within the projects is another option so that through Preventive ongoing Mediation the project matches a mediation process that would dilute inherent conflicts throughout the project.

4. Conflict Resolution Boards

Conflict Resolution Boards are a tool used by large construction projects in order to anticipate to conflict. It can be basically defined as a conflict resolution method based on early preventive intervention, which uses different tools to anticipate to the conflict and to avoid escalation.

4.1 What happens when facing a scenario in which a medium or large construction project is presented?

When facing a medium or large construction project, the figure of the investor or the owner of the idea appears; in the case of urban, infrastructure or energy projects ownership belongs to the State of the country promoting the project; however, ownership of big projects is, in many cases, private. Once the project has been granted the appropriate funding, its design is put out for tender and relevant architecture firms are invited to the call, or infrastructure companies in the case of engineering studies. Once the ownership of the project is established, the basic and implementation project is made and a call for tender is proposed for the construction itself by the construction company or companies if temporary joint-ventures have been established. After the grant, the construction company will proceed, in its turn, to contracting all the work units so that it is completed according to the plan established.

This is the summarised natural process of any construction process; if we look at it again we can see the great number of actors involved in a huge project, as we need to know that each company will provide a team of specialised people to develop each phase. Therefore, we might encounter hundreds of companies involved in one project: Ownership, Project Management team, Architecture Firm, Work Management, Work Implementation, and Contractors. All of them include Heads of Work, technical assistance people and implementation teams. In many cases there are thousands of people in each project, so imagine how many conflicts might arise only due to the coexistence of all these people at the same place, with the same goal in mind, but with different opinions (or discrepancies).

4.2 What is the origin of conflicts in construction projects?

In general, conflicts arise when there are differences of opinion (or discrepancies) about the same concept in which two or more people are involved. If we consider each one of the thousands of concepts to be discussed in a project, we can assume that there will be different opinions about most of them. Mostly, differences of opinions are sorted out by resorting to the design, but often the design is not accurate enough as work have their own life and it is not always easy to foresee the unpredictable, or to do things we would have liked them to be.

Conflicts can be originated by many reasons including: climate, politics, unclear design, contracting management, unexpected geotechnics, lack of a good project management, difficulties related to the communication between participants, cultural differences, dysfunction of the working teams, and also due to high uncertainty caused by any the before mentioned aspects, which triggers mistrust and low evaluation of risks.

At this point, we can imagine how useful Conflict Resolution Boards can be to bridge the logical differences of any medium or large project. If a number of professionals are involved from the beginning to accompany the project’s managers and integrate in the implementation of the project we see that differences of opinion can be managed in an efficient way provided that the work of the third neutral party is effective. If the different works progress and if it is avoided that problem grow or expand the project can flow in an efficient way.

4.3 How are Conflict Resolution Boards implemented?

Conflict Resolution Boards must be implemented from the earlier phases of the project, if we consider that in the initial phases of design the first discrepancies can arise, and also, future potential conflicts can be forged in these first phases, so preventive management must be established considering unforeseen scenarios, applying realistic measures concerning the disappearance of the conflict, promoting high quality standards in terms of design, working with realistic prices and establishing collaborative management at all levels. If we make progress with these standards and introduce them in all in the remaining phases mentioned above, audits prior to contracting can be promoted, and an active monitoring of progress and costs can be proposed. Finally, non-escalation of conflicts methods are promoted in which assisted negotiation between the team members is promoted and also among area directors and participating companies, trying to find new solutions outside the scope of the established contract, helped by the intervention of the professionals in charge of the Conflict Resolution Boards.

4.4 How do Conflict Resolution Boards work?

Conflict Resolution Boards are formed by a team of professionals that adapt to the needs of the project; typically, Conflict Resolution Boards have a basic team, kept throughout all the phases of the project, and this team can be completed by specialised professionals who will intervene in the different phases and provide expertise with the necessary tools for the before mentioned activities; in general, these technicians will be trained in ADR (Alternative Dispute Resolution) abilities or in Conflict Resolution Techniques (Mediation, Conflict Resolution Boards, Dialogue Tables, etc.)

Concerning their financial aspect, Conflict Resolution Boards imply an estimate expense for the project accounting for 0.05/0.26% of the construction price.

We could consider them as a “compulsory insurance to conflict resolution” as all the participants in the project have to respect the contract and can use them if need be or upon invitation of another project’s member.

Conclusions

In my experience as Project Manager and Purchasing and Contracts Manager in the construction sector for national and international projects, conflicts are inherent to projects; we know a conflict is going to occur as there is no material time to manage it until it is unavoidable. Conflict Resolution Boards provide the participants with a tool that prevents from procrastinating early resolution of discrepancies, and a tool that activates the entire help mechanism the parties have to continue working the best way possible and, above all, in the fastest and less expensive manner.