Construction Contracts Research Articles

Dispute Resolution Strategies in Construction Projects to Mitigate Impacts on Time Performance – Project Owner's Perspective

Abstract Disputes in the global construction industry are increasing every year. This is also in line with what is happening in the Indonesian construction industry. PT. XYZ, one of the pulp and paper producers in Indonesia., was the project owner of 128 construction contracts for the company's production facility development services from 2015 to 2021, had experiencing disputes on 45 of those contracts or 35.2% of the total construction contract services. The trend on time taken to resolve those disputes was observed to be 16.38 months on average, which was considered too long. The delay in handling these disputes will result in losses for both the owner and the contractors. The purpose of this study is to analyze the strategy of selecting dispute resolution methods for each identified cause of disputes in the construction industry in Indonesia. This study has identified 13 causes of disputes and 10 dispute resolution methods in Indonesia. A survey questionnaire that using Pair Comparison Analysis has been sent to professionals in the construction industry in Indonesia, questioning about their preference of dispute resolution method for every cause of dispute. The results of the data analysis show that there is a difference process in the dispute resolution methods for each cause of dispute. Although, Negotiation predominantly first ranks in dispute resolution. Meanwhile, for all causes of disputes, all respondents have an agreement that Arbitration and Litigation are the last methods in dispute resolution method in the construction industry in Indonesia. Keywords: Disputes; claims; sources of disputes; disputes resolution methods; time taken to resolve disputes, construction industry; Indonesia

Understanding barriers to the adoption of blockchain-enabled smart contracts in construction projects: perspectives of construction practitioners

Purpose Traditional paper-based contracts are document-intensive, insecure, susceptible to forgery and errors, detrimental to productivity improvement and require multiple intermediaries. Addressing these challenges requires computerised construction to modernise the way modern construction projects are procured with blockchain-enabled smart contracts. Smart contracts could replace paper-based contracts by improving transparency and security and automating contractual terms, processes and transacting activities. However, smart contracts are an emerging technology with limited adoption in construction projects, and the issues influencing its widespread adoption remain unclear and unexplored. Hence, this study aims at exploring and understanding the important obstacles to adoption of smart contracts in construction projects.Design/methodology/approachUsing an international questionnaire survey, the study draws on experienced construction practitioners with direct involvement and knowledge in blockchain technology and smart contract initiatives and activities. Descriptive statistics and fuzzy logic techniques were used to analyse and model the quantitative survey data to establish the critical barriers to smart contracts adoption.Findings Organisational and external characteristics, personal characteristics and technology characteristics constitute major obstacles to the successful adoption of smart contracts. Construction practitioners’ limited knowledge of smart contracts, resistance to technology change, insufficiently digitalised construction industry and lack of or weak governmental support are critical to smart contracts adoption.Originality/value The research contributes to the body of knowledge on diffusing cutting-edge technology by advancing the understanding of practitioners’ perspectives on the primary obstacles to smart contracts adoption. Understanding the obstacles provides industry stakeholders (policymakers, leaders and practitioners) with underpinning knowledge with which to develop and implement corrective actions.

Comparative Analysis of the Major Points Under FAS Revenue, RAS 2/2008 Accounting for Construction Contracts, IFRS 15 Revenue on Contracts with Buyers and Recommendations for Refine the Draft Standard

Comparative Analysis of the Major Points Under FAS Revenue, RAS 2/2008 Accounting for Construction Contracts, IFRS 15 Revenue on Contracts with Buyers and Recommendations for Refine the Draft Standard

Strategic resource amalgamation and diversified business operations: unraveling competitive advantage in Chinese construction contractors

Strategic resource amalgamation and diversified business operations: unraveling competitive advantage in Chinese construction contractors

Cost Performance Comparison of Road Construction Projects Considering Bidding Condition and Project Characteristics

Developing road infrastructure facilities is important because it directly affects national competitiveness and has significant socio-economic ripple effects throughout the country. However, road construction projects are vulnerable to various risks and prone to cost overruns because they are funded by large-scale national budgets and conducted over long time periods. Therefore, tracking the changes in construction costs from planning to completion and providing insights for similar future projects is essential for successful project planning and management. Considering the bidding conditions and project characteristics of road construction projects, this study comparatively analyzed the construction cost growth of 170 road construction projects based on the bid award rate and facility-specific project characteristics, such as construction type, contract method, facility capacity, and construction cost components. This study analyzed the differences in cost performance between various sample groups using non-parametric tests (Mann–Whitney U test and Kruskal–Wallis test), considering the non-normality of the collected sample. In addition, this study conducted multiple regression analysis to examine the causal relationship between all variables used in the analysis and cost performance and to identify critical factors. The results indicated that the construction cost growth of the group with a bid award rate of less than 70% was higher compared to that of other groups. Furthermore, the differences in construction cost growth based on project characteristics were more pronounced in the following groups: construction types (expansion/renovation and complex), contract method (long-term continuous), road length (≥7.5 km), % of bridge/tunnel length (<10%), construction cost (≤USD 100 mil.), % of direct construction cost (≥70%), and % of bridge/tunnel cost (both less and more than 50%). Furthermore, the regression model showed that % of direct construction cost, bid award rate, total road length, and contract method were shown to be critical factors in construction cost growth, which implies the importance of indirect cost management, PDS selection decisions that affect bid award rates, and risk management for complex projects from the perspective of construction cost growth management. These results empirically demonstrate that bidding conditions and project characteristics are key to understanding the pattern of construction cost growth in road construction projects. Hence, this study provides significant references that can be used by policy makers and clients to estimate cost buffers for future road projects.

An efficient claim management assurance system using EPC contract based on improved monarch butterfly optimization models

AbstractThe Engineering Procurement Construction (EPC) contract systems are widely employed in the construction industry. Among the prevalent issues in this sector, cash flow problems frequently lead to decreased productivity and efficiency. To address these challenges, a claim management system is developed based on the Improved Monarch Butterfly Optimization Algorithm (IMBOA) and the principles of EPC. Conventional construction models typically optimize only a single objective, such as time, cost, or delay, which may not effectively enhance overall performance. This study aims to develop a claim management system based on IMBOA and EPC principles to optimize multiple objectives, focusing on minimizing project costs and time delays while ensuring high-quality results. The basic methodology of this research involves integrating EPC and claim management principles with the IMBOA algorithm to create an efficient, high-quality system. This process starts with a comprehensive literature review on EPC, claims, MBOA, and related algorithms. Common disputes and claims in the construction industry are examined, and critical factors influencing these claims are identified. The Monarch Butterfly Optimization Algorithm (MBOA) and its improved version (IMBOA) are explored for their application in optimizing project performance. A case study in China's coal mining industry evaluates the effectiveness of the EPC approach, demonstrating that it minimizes time delays and costs. The IMBOA approach proposed in this study has the potential to mitigate 23% of risks and avoid 32% of risks associated with the action plan of China's coal mining industry. Furthermore, comparative analysis with other optimization models indicates that the developed IMBOA model yields superior results, reducing overall project time by 15% and cost by 18%.

Do transportation infrastructure contracts enhance spending efficiency? Examining state highway construction programs

This study examines the impact of state highway construction contracts on state spending efficiency controlling for production structure, service demands, and situational factors. The theoretical argument is that because highway construction projects are relatively large in scale, complex, and can be monitored through objective performance measurement, state highway construction programs may save government production costs through contracts. Contracting helps highway producers achieve efficiency by optimizing production size based on workload and task complexity. The unit of analysis is 48 state governments’ highway construction contracts from 1998 to 2008. Through a two-stage analysis method including a Total Function Productivity (TFP) index and system dynamic panel data analysis, the results suggest that highway construction contracts enhance state highway spending efficiency, especially for large-scale construction projects.

Preventing Contract Termination Pitfalls in Construction Projects: Insights from the Ghanaian Construction Industry

<i>Purpose</i>: Premature termination of construction contracts is a recurring problem that causes financial losses, delays, and strained stakeholder relationships. However, there is limited research on the specific causes of contract termination, particularly in Ghana, and practical solutions to prevent it are often overlooked. This study aims to investigate the pitfalls of contract termination in the construction industry and to propose effective prevention strategies based on empirical data. <i>Design/Methodology/Approach</i>: A quantitative research approach was adopted, employing a combination of purposive and random sampling techniques to gather data from 315 participants representing diverse roles within the construction sector. A structured questionnaire based on contract termination pitfalls was used, and data analysis involved descriptive statistics, factor analysis, and structural equation modeling (SEM) techniques. <i>Findings</i>: The study identified several critical factors influencing contract termination, including prompt payment by clients, adherence to contractual terms, competent supervision, and effective dispute resolution mechanisms. Through factor analysis and SEM, two main constructs emerged: Proactive Contract Management Strategies (PCMS) and Contract Termination Risk Mitigation Measures (CTRMM), each comprising specific indicators crucial for preventing terminations. <i>Originality/value</i>: This research contributes to the existing literature by providing empirical evidence of contract termination pitfalls and effective prevention strategies within the construction industry. The study’s multidimensional analysis approach, integrating quantitative techniques with Structural Equation Modelling (SEM), enhances the understanding of complex contractual dynamics and risk management in construction projects. <i>Implications</i>: The findings have practical implications for construction stakeholders, project managers, and policymakers. Implementing proactive contract management strategies such as clear payment protocols, rigorous quality control, and effective communication channels can significantly reduce contract termination risks. The study underscores the importance of integrating legal frameworks, innovative techniques, and managerial approaches in contract portfolios to enhance contract performance and project success in the construction sector.

Automated Risk Analysis for Construction Contracts Using Neural Networks

Automated Risk Analysis for Construction Contracts Using Neural Networks

Arbitration In Legal Remediesn Against Dispute Resolution Construction Service Contract

The purpose of this research is to find out what are the advantages and deficiencies in problem solving through arbitration and how the process dispute resolution through arbitration in construction contract disputes. By using research methods juridical normative, it can be concluded, that: 1. Arbitration is the way settlement of a civil dispute in outside the general court based on arbitration agreements made written by the parties to the dispute. 2. The existence of a written agreement negates the right of the parties to apply resolution of disputes or disagreements what's included in the agreement state court.

Data Classification System for Economic Analysis after the Implementation of Separate Order Construction in the Firefighting System Installation Business

Data on the performance of the firefighting system installation business are scarce compared with other construction projects, such as electricity and information and communication projects, where separate order construction was previously practiced. This study aimed to obtain data on fire facility construction contracts by analyzing the current data, deriving improvement plans, and reviewing empirical studies on separate order construction from various construction projects, both domestically and internationally. An analysis of the data from Statistics Korea and the Public Procurement Service revealed an annual increase in the number and amount of firefighting system installation projects. In addition, the scale of the construction could be identified using separate order construction data. This study highlights cost reduction, shortened construction delay periods, and increased construction speed as the key economic review items. Based on these findings, a data classification system for the construction of firefighting facilities was proposed and categorized according to the project size, ordering organization, contractor, type of construction, construction period, and contract method.

Force majeure in the Supreme Court: MUR Shipping BV v RTI Ltd [2024] UKSC 18

Force majeure (FM) clauses are designed to free both parties to a contract from liability when an event beyond their control prevents one or both of them from performing the contract. Examples of such events include inclement weather, natural catastrophes, political upheaval, changes in applicable rules or regulations, or unavailability of essential supplies or services. It is common to include FM clauses in manufacturing, construction or transportation contracts, where there is a high risk of such events occurring due to the length of time required to perform the contract, or the complexity of the performance obligations. Often a lot of money is at stake and pre-allocating the risk of such events is crucial to avoid disputes further down the line. While disputes regarding the meaning and effect of FM clauses may not be unusual, such disputes rarely reach the Supreme Court. MUR Shipping was one such rare case.

Joint and several liability at the interface of national and international law and the FIDIC conditions of contract

Abstract The international terms of the 2017 FIDIC Red Book (reprinted and amended in 2022) state that, when the contractor is a joint venture (JV), all members are jointly and severally liable to the employer. These terms also establish certain procedural rules—the most important ones being the submission to the employer of the JV undertaking and the appointment of a leader. However, these international terms do not provide for substantive rules pertaining to the plurality of the JV members. These require reference to the applicable law that governs the construction contract. The applicable law can be domestic law, such as Qatari law, or an international soft law, such as the Unidroit Principles. Comparing these two possibly applicable laws, it becomes evident that there are no significant differences between the two regarding the substantive rules concerning a plurality of obligors. Furthermore, it is argued that the majority of these substantive legal rules, whether national or international, are inoperative in a construction contract incorporating the international terms of the FIDIC Red Book.

Application of large language models to intelligently analyze long construction contract texts

The emergence of large language models (LLMs) has provided an opportunity to assist humans in quickly reading, searching, and understanding the contents of construction contracts. However, the limited context length of LLMs restricts their ability to process lengthy contract documents, which hinders their application in the construction industry. This study proposes intelligent analysis methods for long construction contracts, which enables LLMs to handle contracts that exceed their context length through a two-stage text segmentation. We further utilized the segmented text chunks for content compression and intelligent question-answering applications. The FIDIC contract was used for testing. A condensed version of lengthy contracts summarizes the provisions in a shorter format. It maintains a high level of correctness and readability, offering practitioners additional options to read contracts of varying lengths based on their needs. The satisfaction rate of the question-answering outcomes reached 93.3%, allowing practitioners to quickly obtain specific clauses of interest and relevant contract knowledge through personalized queries. The performance of the 8K model using our methods is comparable to that of the 128K long-text models, while reducing computational power. This study expands the potential for applications of LLMs in contract management within the construction industry.

A construction contract administration (CCA) framework for graduate architects’ professional development

PurposeConstruction contract administration should be carried out by a person (normally engineer or architect depending on the type of contract) with expert technical knowledge of the construction process, strong leadership quality, highly developed interpersonal skills and an understanding of contractual, legislative and statutory underpinnings. However, due to a shortage of architects, graduate architects have been assigned to perform a partial role. Architectural firms are disappointed with the quality of the graduates and still note that they have to mentor them to be competent for their jobs. This paper aims to develop a construction contract administration (CCA) framework for graduate architects that aids the smooth running of a construction contract.Design/methodology/approachSeven housing projects in Malaysia have been selected as case studies. Documentation review and semi-structured interviews relevant to selected case studies were conducted to collect data to develop the CCA framework. The draft framework will then be validated through a focus group study.FindingsA total of 5 themes and 11 sub-themes with core tasks were developed in the CCA framework. The themes involved are claims and legal matters management, communication and relationship management, project management, design management and quality assessment and management. Sub-themes are authority matters, building certification, meetings, coordination checklist, letter writing, contract documentation, building material, design brief, building sustainability and workmanship quality standards, contractors’ submission and building details.Originality/valueThe contribution of this study can be utilized for developing further models in the future that would improve the work performance of graduate architects. The framework assists the university by moving forward to the professional practice stage. In addition, it indirectly enhances the potential of graduate architects to perform efficiently and intensifies the bonding between project stakeholders.

Adoption of Life Cycle Thinking: Impact-driven comparative assessment of Japanese construction corporations’ trends in practices

Although life cycle thinking offers a well-founded set of concepts, methods, and tools for organizational contexts, only little is known about its relevance in the construction sector. In this sector, construction corporations are key players. In this work, a novel impact-driven method to assess the adoption of life cycle thinking by construction corporations is introduced. Japan, as a high-income country with a relatively long history of environmental policies informed by material flow analysis, is chosen as the context. Five Japanese construction corporations and respective reporting are used as case studies. Trends in environmental impacts over time of the case study corporations are assessed using two indicators: resource and carbon productivity. In comparison, an automated text corpus analysis workflow is presented to explore the corporate report’s life cycle thinking-related content in a meaningful way. Comparing the period of 2014–2018 and 2019–2023, an overall relative increase in framework adoptions (77%) and their integration in corporate categories (85%) in corporate reports indicates its increased procedural relevance among Japanese construction contractors. Findings show how the carbon indicator is embedded in various frameworks and, for instance, reveal an increased relevance of Scope 3 emissions as a framework on a low level. However, Scope 3 is also utilized as a performance indicator. To this end, considerable temporal differences in adoption practices are observed. Finally, a potentially effective corporate adoption model is identified through the comparative research design. The proposed method can be applied to other construction corporations and regional contexts.

Contemporary Methods of Resolving Disputes Arising from FIDI C Construction Contracts Between the Employer and Contractor

Contemporary Methods of Resolving Disputes Arising from FIDI C Construction Contracts Between the Employer and Contractor

Evaluating the project management maturity in the construction industry of developing countries, Ghana in perspective

This study evaluates construction contractors' project management maturity levels, examining various factors such as ISO certification, capacity building programs, contractor type (road vs. building), and specific knowledge areas. Data was gathered through surveys and assessments to evaluate the maturity of different processes and practices. The findings reveal various maturity levels across the industry, with significant variations among contractors. Common challenges include gaps in risk management, safety protocols, and overall project management practices. Factors such as ISO certification and capacity-building programs positively impacted maturity levels. However, targeted training and education are crucial for addressing specific knowledge gaps. The analysis identifies critical recommendations for improving project management maturity in the construction industry, including fostering a culture of continuous improvement, promoting knowledge sharing, implementing tailored training programs, and developing industry-specific standards. By addressing these challenges and implementing appropriate strategies, the construction industry can enhance project outcomes, reduce costs, and improve competitiveness.

Intelligent identification of risks in construction contract clauses based on semantic reasoning

Purpose The number of construction dispute cases has surged in recent years. The effective exploration and management of risks associated with construction contracts helps to directly enhance the overall project performance. The existing approaches to identify the risks associated with construction project contracts have a heavy reliance on manual review techniques, which are inefficient and highly restricted by personnel experience. The existing intelligent approaches only work for the contract query and storage. Hence, it is necessary to improve the intelligence level for contract risk management. This study aims to propose a novel method for the intelligent identification of risks in construction contract clauses based on natural language processing.Design/methodology/approach This proposed method can formalize the linguistic logic and semantic information of contract clauses into multiple triples and transform the structural processing results of general clauses in a construction contract into rights and interests rules for risk review. In addition, the core semantic information of special clauses in a construction contract, rights and interests rules are used for semantic conflict detection. Finally, this study achieves the intelligent risk identification of construction contract clauses.Findings The method is verified by selecting several construction contracts that had been applied in engineering contracting as a corpus. The results showed a high level of accuracy and applicability of the proposed method.Originality/value This novel method can identify the risks in contract clauses with complex syntactic structures and realize rule extension according to the semantic relation network of the ontology. It can support efficient contract review and assist the decision-making process in contract risk management.

Extension of Time and Liquidated Damage Issue in Construction Contract: Nepalese Legal Provision and Practice

Extension of Time and Liquidated Damage Issue in Construction Contract: Nepalese Legal Provision and Practice