For contractors running small and midsize construction businesses, even a single major conflict can turn an otherwise profitable job into a financial loss. The good news is that most disagreements arise from widely encountered and often preventable issues. Here are some dispute prevention tips to consider.

Refine your contracts

Ambiguous contract language is among the most common causes of disputes and legal troubles for construction companies. Pay close attention to provisions that affect your right to compensation and time extensions for owner-caused delays or changes. These include:

• Change order provisions,
• No damages for delay clauses,
• Differing site condition provisions, and
• Substantial completion requirements.

In addition, stay up to date on laws and regulations that affect your project types. Over-reliance on boilerplate contracts is a common mistake. If you work on public jobs, for instance, evolving federal or state rules may require certain mandatory contract clauses—and, in some cases, courts may treat certain required provisions as enforceable even if they’re not explicitly included in construction agreements. Failure to comply with these rules could invite disputes or litigation.

Schedule carefully

An unrealistic or impractical work schedule often sets the stage for conflicts among project stakeholders. This is where a thorough preconstruction process comes in. It should result in, among other things, a baseline schedule that all parties accept from the start. Without one, it will be exceedingly difficult to evaluate delay claims or change orders.

A solid schedule also helps identify potential delays early and allows time to address them before they lead to major disputes, which can disrupt cash flow, reduce bonding capacity and increase financing costs. If you regularly fall behind on projects, consider implementing more effective scheduling practices and technology.

Use training and accountability

No matter how well-drafted your contracts are, disputes can still arise if your project managers, field supervisors, and crews don’t follow contractually mandated procedures. For example, be sure they all understand the change order approval process and follow it to the letter. This means complying with notice and approval requirements and thoroughly documenting additional costs.

The truth is, by the time a construction business owner learns of a dispute, it’s often too late to prevent dire consequences. Project managers and field supervisors are typically best positioned to spot potential pain points as they arise. Train and upskill your team leaders to identify troublesome issues and resolve them quickly, calmly, and professionally. And hold them accountable for doing so: Building a culture of continuous improvement and accountability can help make costly disputes rare.

Consider other delivery methods

If your construction company is constantly running into trouble under the traditional design-bid-build approach, an alternative method might work better. For example, with integrated project delivery (IPD), contractors, owners, and architects (and even some subcontractors and suppliers) enter into a mutual contract. Doing so helps avoid disputes because the parties collaborate from the beginning—agreeing on goals, target costs, and allocation of responsibilities, risks, and compensation.

Many IPD agreements include mutual waivers of certain claims (except for willful misconduct) and shared decision-making structures. Sometimes they require unanimous consent, subject to arbitration or another alternative dispute resolution mechanism.

Leverage tech solutions

Evolving technologies that enhance collaboration and information sharing can help reduce disputes as well. For instance, building information modeling (BIM) has long been making inroads into construction. This software creates 3-D or 4-D models that enable parties to view project deliverables from different angles, improving understanding of the spatial relationships between building components and their costs.

More to the point, BIM helps stakeholders visualize how design or material changes would affect the project. It can thereby help catch and address potential conflicts before work even begins. Of course, there are other tech solutions to consider. Scheduling software may tighten up job planning; a digital project management platform can improve communication and so forth.

Beware the tipping point

It’s probably impossible to eliminate every potential trigger for a project dispute. In fact, healthy debate—whether during preconstruction or on the job site—can lead to better project outcomes. But you want to avoid tumbling over the tipping point where disagreement turns into serious, job-compromising discord.

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