In a complex construction industry, design-build projects help speed things up between investors, contractors, and designers by focusing on a single point of responsibility. Instead of dealing with multiple contracts and responsibility points scattered between various project actors, the design-build model minimizes the possibility of disagreement by merging designers and contractors into one entity that works with the investors on large construction projects.
Although merging responsibility for the project completion into one point enables better workflow and fewer conflicts with the investor, problems occur when designers disagree with contractors on vital technical issues, giving rise to design-build disputes.
This blog post will dig deeper below the surface to find the root causes of design-build disputes, showing how the mediation approach can address these issues promptly and cost-friendly.
The dispute causes between designers and contractors in design-build projects to divide into several broad categories, such as poor communication, unrealistic expectations, design errors, etc. From a general point of view, these dispute causes are common to all complex projects in any business area. But the root causes of design-build disputes are hidden deeper – in technical aspects of designer-contractor relationships – and are unique to design-build construction models. Let us take a closer look into these issues.
Design-build disputes typically occur during project stages, known as the tender and detailed design phases. Problems related to specific technical issues can arise between designers and contractors within each of these phases.
Disputes during the tender phase are the most frequent due to the lack of information about the project. Designers often make assumptions based on data at hand, which they test during the later stages of the project. That proves to be the source of many disagreements since insignificant details are present in the first phases of the construction. Below are the most common issues giving rise to a dispute during the tender phase:
The tender phase of the project is typical for insufficient information about the construction work ahead. That is why design contracts typically require 15 to 30 percent completion in this phase, and designers rarely go beyond their contractual obligation. Because contracts often lack precise determination of design scope, disputes between contractors and designers occur regarding the level of their work completion.
Contractors often use prototypes of design elements (such as bridges, tunnels, and metro stations) to price the works for each parameter. Because of specific site conditions, the design and costs for individual elements can differ from the prototype. Conflicts may result from site adaptations that raise the pricing of the works, making the project less competitive at tender.
The tender bidding price depends on the documents created in the detailed design phase. The question for designers is what level of detail they should aim at while developing design documents. Disputes between contractors and designers arise due to a lack of design details leading to inappropriate pricing and unsuccessful bidding.
Bidding for large construction projects means sending documents following the owner’s requirements. But designers sometimes do not meet those requirements in their drawings or warn the contractor of non-compliance, leading to heated disputes.
The tender phase is typical for the absence of precise site data, making it harder for designers to develop workable tender drawings. That is why designers have a 15-30 percent completion contract obligation. Despite that, updated site data can differ significantly from the design, giving rise to disputes between contractors and designers.
Disputes arising during the detailed-design phase have roots in disagreements between designers and contractors about the meaning of change to the design, responsibilities to third parties, and the quality of claims about changes in design scope. See the most common disputes in more detail:
Owners award design-build projects relying on partially developed designs (with 15-30% completion). The design completion will occur in the post-award detailed design phase after new project information. Design changes are typical in this stage, but the dispute arises over what constitutes the design scope changes. The root of the conflict typically lies in the difference between regular design iteration and requests for design change.
Third parties, such as property owners and utility providers, are inevitable in large infrastructure projects. Coordinating activities with these actors is vital to successful project completion. Because design-build construction projects already require constant internal communication, negotiating with third parties adds complexity to the whole matter. Miscommunication leading to project errors is one of the root causes of disputes.
Designers regularly demand compensation adjustments due to design scope changes. However, contractors often reject these claims citing improper claim substantiation. Disputes between contractors and designers arise from a lack of precise definitions of what makes proper substantiation.
As an out-of-court method, mediation offers unique benefits to disputed parties in design-build conflicts. Mediation enables more flexibility, informality, confidentiality, and chances of reconciliation. These advantages are unmatched among other dispute resolution methods, especially litigation.
In addition to time and cost-saving benefits, mediation offers the disputed parties an opportunity to start over. Instead of ruining complex, long-term business relationships, mediation helps parties find a common language, overbridge differences, and continue thriving businesses with a new-found zeal based on a better understanding of each other’s needs.
Here is how mediation works during each phase of the dispute:
All tender-phase dispute causes have one thing in common: a lack of communication. Because this phase is typical for insufficient information about the project, parties tend to wing it and leave potential issues (and there are many) for later stages. Litigation can do little to help resolve these problems at a deeper level. It can only try to find the culprit and ruin existing relationships. On the other hand, communication is a founding principle of mediation. The mediator focuses all their efforts on bringing parties to a negotiation table and motivating them to talk. In a neutral, friendly environment, parties can open up about pressing issues that lead to disputes. Designers can express their grievances about the absence of workable information that would enable them to complete drawings in more detail. Contractors use mediation sessions to address their (often unrealistic) expectations and dissatisfaction with the design. In any case, parties leave the mediation sessions feeling relieved, with a dispute behind them and promising cooperation ahead of them.
Detailed-design phase disputes typically result from contract deficiencies leaving space for different interpretations. For example, not defining what constitutes design scope changes leads to incomplete designs and improper bidding prices at the tender. Also, contractors reject claims for adjusted compensation because of unclear rules about the substantiality of claims. Coordinating with third parties requires precise determination of the contact person (designer or contractor). Unlike litigation, which only adds insult to injury in design-build disputes, mediation focuses on finding true intentions between contract parties. Mediation sessions are a unique opportunity to interpret the contract through meaningful conversation. With a better understanding of contractual obligations, parties can continue doing business without the risk of future conflicts over the same issues. These examples show that the role of mediation is constructive and positive, unlike the adversarial and destructive effects of litigation.
David L. John is a certified Florida mediator with an in-depth understanding of complex business issues.
Design-built disputes are one of the areas in which Mr. John excels. His unmatched skills in mediating these complex construction conflicts come from rich on-the-field experience and countless real-life interactions with designers, contractors, and investors throughout his eventful business career.
Relying on valuable lessons he learned through decades of demanding work as a construction consultant, David can help you settle your design-build dispute and reach mutually beneficial outcomes – no matter in which project phase disagreement occurred.
Contact us today at 954-444-2900 or email us at ddjohnnz@gmail.com to see how we can help.
