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PROBLEM RESOLUTION PROCESS TO AVOID DISPUTES IN PARTNERING

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PROBLEM RESOLUTION PROCESS TO AVOID DISPUTES IN PARTNERING Powered By Docstoc
					    PROBLEM RESOLUTION PROCESS TO AVOID DISPUTES IN
       PARTNERING PROJECTS – THE UK EXPERIENCE.

                Presented at Pacific Association of Quantity Surveyors
                 Skycity Convention Centre, Auckland New Zealand.
                                   8-12 June 2007

Nur Emma Mustaffa1 and Maizon Hashim2

Centre of Construction Contract Management, Faculty of Built Environment,
Universiti Teknologi Malaysia, 81310 Skudai, Johor, MALAYSIA.


Over the past decade, partnering has been acknowledged in UK as a non-adversarial
approach to procurement in the construction projects in the industry. The application
of partnering concept has been extended to various types of projects. An essential
component of any partnering agreement is a defined problem resolution process
which deal with any problems as they arise, quickly and informally before a full blown
dispute. It is claimed that the prominent benefits of employing this procurement
method is reduction in litigation, better working environment and reduction in claims
and change orders. A research has been undertaken to explore the problem
resolution practice in partnered projects in the UK. A nationwide questionnaire survey
was used to collect opinions from experienced partnering practitioners. The results
highlighted that typical problems in partnering projects do not differ from the
conventional non-partnered projects with client’s expectations and non-availability of
information chosen as the common problems. The results also gave a positive
feedback in demonstrating that problem resolution mechanism is an effective
approach to dispute avoidance. Relationship maintenance between partners has
been given utmost consideration in evaluating possible solutions to any given
problem.


Keywords: Partnering, Dispute resolution, Problem resolution process




1
    ammerun@gmail.com
2
    maizonhas@yahoo.com
INTRODUCTION

The early 1990’s was an adversarial period for the UK construction industry (Fenn,
1991; Fenn,1994). Latham (1994) and Egan (1998) were responsible for the formal
introduction of partnering to the UK construction industry. Latham (1994) advances
that the main philosophy underlying partnering is to reduce the adversarial and
litigious culture that exists in construction, and to resolve problems jointly and
informally through more effective forms of inter-firm collaboration. Project partnering
and strategic partnering are the two types of partnering that predominate in the
literature (Love et al, 2002). Many features are common to both types, with the
dividing line between the two being the time span and number of projects governing
the agreement. Project partnering is adopted on a short-term basis while strategic
partnering is long term. Lazar (1998) distinguishes partnering from other dispute
resolution method by suggesting that partnering is a dispute prevention method that
is proactive. It prevents issues or problems in a project from escalating into costly
disputes, rather than trying to resolve them after they have become contentious.


PARTNERING & PROBLEM RESOLUTION MECHANISM

Dispute avoidance or early problem resolution of contentious issues is one of the key
objective measures of the success in any partnering arrangement (ECI, 1997). The
partners anticipate problems and devise action plans to address how these problems
are jointly identified and resolved (Cowan et al, 1992). It is concern about how
disputes and differences of opinion are dealt with or avoided before it turns into major
ones. And it encompasses factors such as a systematic approach to problem
resolution; seeking solutions and not parties to blame; more and better discussions;
less paperwork but more constructive correspondence; based on win-win solutions;
equality of rights between parties and requires mutual acceptance of the principle
that adversarial attitudes waste time and money. In resolving disputes in partnering,
partners need to separate the people, personalities and turf differences from the
problem and focus on project goals, facts and objective measurements (Fisher,
Roger and Ury, 1981). The focus must be on resolving disputes in a cooperative,
open fashion which results in mutually acceptable, timely solutions.

The method of non-adversarial dispute avoidance in partnering involves bringing the
individuals concerned face to face through the problem resolution escalation ladder.
Problem resolution in partnering is three tiered in its approach to dealing with
problems. It is about an agreed way of dealing with problems. Quick resolution at
the lowest possible level is its prime concern so as to avoid it getting in the way of
productive work.


DISPUTE AVOIDANCE IN PARTNERING

Naoum (2000) stipulates that one of the defining features of a successful partnering
arrangement is the existence of a mechanism for problem resolution. Tyler and
Matthews (1996) emphasise that problem resolution forms directly as an essential
element of partnering. Dodsworth (2002) stresses that effective dispute resolution
procedures are essential in partnering
When the parties to a project are faced with a potential problem, the availability of a
comprehensive procedure for resolving problem gives those parties and that project
advantages. The nature and consequences of a dispute cannot be predicted in
advance, so comprehensive arrangements for addressing the wide variety of
problems in their proper prospective, keep the parties on the project focussed on key
project goals and objectives, and finally move the problem through the process
toward resolution.

Guidelines for resolving problems must be in place before the project is under way.
Escalation is the control and resolution mechanism for dealing with problems.
Separate levels of problem solving team should be established at different level of
management in order to attain an effective problem resolution process. The common
pattern is called three levels of management responsibility that involves first level
management (technical), project management level (managerial) and senior
management level (political) (Bennett and Jayes, 1995; Hellard, 1995). Each of the
level is given the responsibility within a tight time-frame to find a solution to a given
problem. Given a problem is unresolved within the time prescribed, it is then
automatically referred up to the next level but this should be seen as ‘a difficult way
to find a way forward that does not damage the partnering approach’ (Bennett and
Jayes, 1995, p 41).

Weston and Gibson reported (1993), projects that utilise partnering have less cost
and schedule growth, fewer claims and change orders, and greater value
engineering. Likewise, Pinnel (1999) suggests that partnering is seen as the answer
for a rational, non-adversarial and cost effective approach to resolving construction
disputes.

Empowerment is vital in partnering because the process empowers all the project
personnel to accept responsibility by delegating decision making and problem solving
to the lowest possible of authority (Dunston and Reed, 2000). This is in line with
Warne’s (1994) view which states that individuals closest to the problem are best
equipped to make related decision. Those employees who are empowered rise to the
challenge and make sound decision.

Partnering is based on the principles of hybrids, where elements of several forms of
ADR are combined in an informal process to try and eliminate problems in the
construction industry before they have a chance to become entrenched disputes
(Keill,1999) Even though the partnering process is not a legal process, the
combination of facilitation, mediation and negotiation is meant to improve
communication and to provide a platform for the interdisciplinary management of
project risk.


THE SURVEY

A questionnaire survey was adopted to gather data from the UK partnering
practioners. The ten-page questionnaire is in the closed and open-ended in nature
and in order to present the questionnaire in a systematic way, it was decided to
divide the questionnaire into three different sectors. The questions in Part One of the
questionnaire was on the types of problems in a partnering project. The Second Part
was on the problem resolution procedure. General information about the respondents
was asked on the last part of the questionnaire, the Third Part. The questionnaire
was prioritised in such a way to ensure that the respondents would answer the most
important questions first. Closed-ended questions have benefits in the form of time
saving because the respondents only need to tick or circle the answers. It also assist
the respondents because reply options have been given to them and in terms of data
analysis, it would be much easier (Root and Blimass, 2003)

The industry-wide survey of UK construction organisations with experience or interest
in partnering was conducted with convenience sampling adopted targeting professional
bodies, client and contracting organizations. The sample was identified from RICS,
RIBA, RSL, Movement for Innovation (M4I) partnering demonstration project websites
and CN+ Construction News, and some key project participants of partnering project
were identified following Chan et al (2003).

A review of construction management research using postal surveys for data collection
reveals worryingly low participation, with rates as low as 5.9% reported in Dulaimi et al
(2003). Cheng & Li (2001) developed a conceptual model of partnering based on 27
responses from questionnaire survey, though no indication of the response rate was
given. 59 responses from different organisations were used for analysis for the current
research, making an effective response rate of 8%.


SURVEY RESULTS ANALYSIS

General background of the respondents
The majority of the respondents (83%) were from the private sector, with annual
turnover of most being more than £5 million. The majority of them (84%) were more
than fifteen years old of establishment. In terms of organisation’s experience
involving in partnering projects, the results indicate that the majority (67.0%) of the
organisations represented by the respondents have an experience ranges from 2 to
10 years in partnering. The least experienced (4 organisations) had less than 2 years
of partnering experience. It can be inferred from the results that organisations most
experienced in partnering were more motivated to participate in the survey. With this,
it is considered that the data should be a good base for the analysis and the result is
therefore a reflection of the prevailing industry’s opinion in the UK, following Wong
and Cheung (2004).

With respect to the number of partnering project in which they have been involved in,
the results show that the majority of the organisations have been involved in more
than 15 partnering projects (57.6%) and that most of the partnering projects have
been carried out by the private sector. Most of the organisations have been involved
in commercial and education types of partnering projects ranging between £2.5M to
£10 million. Sanders et al (1992) suggested that partnering should be implemented in
large projects that would involve a large construction firm. Most of the partnering
projects are of moderate technical and design complexity. Housing was the most
common type of project where partnering was adopted indicates that housing
procurer is following the suggestion made by Latham (1994) and Housing Forum to
adopt partnering in order to deliver improvement in the procurement of housing
projects. The duration of the partnering projects is most commonly seen between 12
to 36 months, and is less adopted for projects longer than 36 months. In terms of
initiation of a partnering project, client is the main party who initiate partnering and
the common number of parties to a partnering arrangement is between 4 to 7 parties
(88.1%). A bigger number of partners to a partnering arrangement may be difficult to
control (Lendrum, 2000).

Procedures adopted before partnering
Part One of the survey also tried to determine which procedures and tools that have
been adopted by the organisations before they embark on the partnering scheme by
requiring the respondents to choose from a list of procedures which are relevant to
their organisations. Getting the commitment from the top management level of the
organisation was the common answer given with a response rate of 94.9% as
depicted by Figure 1.0 below. Other procedures adopted by the organisations are
contract specific partnering workshop (83.1%), identification and appointment of
personnel who will become a ‘champion’ or ‘team leader’ (76.4%), staff training
(76.3%) and empowerment of the staff (72.9%). The procedure which is least
adopted by the respondents’ organisations are making deciding on how many
projects will be implemented on partnering basis (28.8%) and track costs and savings
associated with partnering (57.6%). Getting the commitment from top management
level of the organisation is one of the critical success factors for partnering (Cheng &
Li, 2001; Moore et al, 1992; Cowan et al, 1992), indicating that the organisations are
aware of the importance of getting the support from the top level management to
ensure that the arrangement is a successful one.

Problem occurring in partnering projects.
Part 2 of the survey was to determine how the type of problems encountered in
partnered projects differed from ‘conventional’ non-partnered projects. In fact, the types
of problems that occur are substantially the same in partnered and non-partnered
projects that comprises of client’s expectations, non-availability of information and
design changes are problems with the highest frequency of occurrence. Amongst other
identified problems from the survey include misinterpretation of contract,
misunderstandings between partners due to unpredictability of contract, variations in
specification/quantities, delay in site possession/design information, poor
administration/management of projects, poor communications between project
partners, design error, payment (such as caused by variations, interim claims, balance
of contract sum, time extension cost, delay costs, bank guarantee, retention monies),
performance of partners in the project and site investigation. The problems with the
least frequency of occurrence are re-nomination of subcontractors and unusually
severe weather. This somewhat reflect that the respondents had answered the
questions based on their partnering experience because the literature has stated that
in partnering, the subcontractors are selected before a partnering project start.
According to Chan et al (2003), problems do occur in partnering project. To a great
extent, the findings validate their work. In short, all these ‘normal’ problems are not
prevented in partnered projects, rather the success of partnering lies in limiting the
severity of their impact on project objectives through more collaborative and
cooperative approach to their solution.
                                                                                                       No. of Responses




                                                                                              0
                                                                                                  10
                                                                                                        20
                                                                                                             30
                                                                                                                   40
                                                                                                                          50
                                                                                                                               60




                                                    Commitmt from top level management


                                                     Contract specific partnering workshop


                                                                  Champion' identification


                                                                              Staff training


                                                                            Empowerment


                                                                      Contract adjustment


                                                                         Partnering charter


                                                            Executive partnering workshop


                                                                   Joint evaluation process

                                                    Track costs and savings associated with
                                                                  partnering
                                                                                                                                    Procedures Adopted before Partnering




                                                               Organisation policy changes


                                                        Joint problem resolution workshop
Figure 1.0 : Procedures adopted before partnering




                                                                Decision on no. of projects


                                                                                    Others
Application of problem resolution mechanism
It is important to point out that the majority of the respondents agreed that partnering
is an effective arrangement to avoid disputes in a project (92.0%) and that the
majority of them (79%) stated that they have a defined problem resolution
mechanism within their organisation. A defined problem resolution mechanism can
be interpreted as an agreed approach to problem solving in a partnering agreement.
The remainder of the respondents claimed to lack a defined problem resolution
mechanism, nonetheless approached the problems through open discussion, either
formal or informal among the partners and aware of the importance of maintaining
trust and mutual agreement between parties.

In terms of having the experience of involving in a problem resolution mechanism, from
the overall 59 respondents, only 26 (44.1%) of them have been directly involved in
problem resolution procedure in partnering projects. In terms of dealing with problems
was concerned, most (88%) cited ‘empowerment’ of the staff directly involved as
important, where authority and responsibility for decision making is devolved to the
levels where problems occur. Again, this is consistent with the general philosophy of
partnering practice to avoid recourse to contractual clauses where possible. The
results also show that most of the respondents (88%) also had a stipulated time frame
within which they would hold formal meetings, where needed, to settle problems
outstanding. Most (69%) sent out prior notice to all relevant partnering participants
highlighting the matter to be resolved. As far as preparing staff was concerned,
communication enhancement via training and decision making were not commonly
adopted. It could be argued that such ‘soft’ skills, rather than procedures and rules, are
at the heart of successful partnering, relying as it does on a less formal approach to
contracting.

In evaluating possible solutions in the problem resolution process, the respondents
stated that maintenance of the relationship between the partners and potential
cost/value involved in resolving disputes are the prime factors they considered.
Avoiding further legal recourse and time scale have been seen as the least important
factors. The finding of the survey confirms the results of Macbeth and Ferguson
(1994) and Black et al (2000).


CONCLUSION

One of the defining features of partnering is the requirement to establish a structured
but informal problem resolution mechanism. Partnering offers a solution into ‘how to
stop a simple problem spiraling from a breeze into a whirlwind’(Nael G. Bunni, 2003).
The literature on partnering widely contends that it should reduce the adversity and
extent of litigation prevalent in the industry. One of the defining features of partnering
is the requirement to establish a structured but informal problem resolution
mechanism. The survey explored actual approaches to the partnering problem
mechanism for partnering projects. Exploration of the data also suggests that
organisations which have long and firmly established are likely to adopt partnering in
the projects and that partnering is popular for housing and commercial projects.
Problems such as client expectations, lack of information and non-availability of
information do arise in partnering projects which reflects that the type of problems in
partnering projects do not differ from the traditional procurement projects. These
typical problems are resolved through a defined problem resolution mechanism as
the majority of the respondents have the mechanism in place and agreed that
partnering is an effective arrangement to avoid disputes.
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Bennett, J & Jayes, S. (1995) The seven pillars of partnering : a guide to second
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Cheng, E.W.L and Li, H (2001) Establishment of critical success factors for
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Cheng, E.W.L., and Li, H. (2001). Development of a conceptual model of
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Fenn, P.,(1991) Managing Corporate Conflict and Resolving Disputes on
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