Quantification of costs for dispute resolution procedures in the construction industry

Richard J. Gebken, G. Edward Gibson

Research output: Contribution to journalArticle

47 Scopus citations

Abstract

The extent to which disputes affect the construction industry has been well-documented. There are a plethora of anecdotal stories, and even some data that explain how unresolved conflict can impact project cost, schedule, and quality. In response, many systems and procedures have been developed to address disputes and their resolution within the construction industry. However, no data exist that quantitatively compare these various alternatives and the real costs of resolving a dispute using methods other than litigation. This paper presents a framework for identifying and capturing the transactional costs incurred to resolve disputes throughout the full spectrum of resolution options. Transactional cost data from 46 recently completed construction projects, totaling over $2 billion of total installed costs, confirm that these sums can account for a large portion of the settlement/award amount, the original claim amount, and even the total contract value when using some dispute resolution methods. Furthermore, using dispute trend and cost data, a comprehensive dispute management system based upon the concepts of risk management is proposed, highlighting the overriding objective of promoting dispute avoidance/resolution in the most cost-efficient manner possible.

Original languageEnglish (US)
Article number004603QPI
Pages (from-to)264-271
Number of pages8
JournalJournal of Professional Issues in Engineering Education and Practice
Volume132
Issue number3
DOIs
StatePublished - Jul 1 2006
Externally publishedYes

Keywords

  • Conflict
  • Construction industry
  • Cost control
  • Dispute resolution
  • Litigation
  • Risk management

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Industrial relations
  • Strategy and Management

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