The construction industry in the recent times has emerged as one of the major ones of the world and on an annual basis generates more than $129.93 billion revenue (Hughes, Champion & Murdoch, 2015). Furthermore, unlike the other industries of the world wherein the method of standardization is being followed in this particular industry each of the projects which are being used for the construction of various buildings as well as sites are unique (Hughes, Champion & Murdoch, 2015). In addition to this, it is seen that the various organizations related to the construction industry take the help of various kinds of projects for the completion of the construction works. It is precisely here that the various construction contracts gain prominence. Thus, the various organizations take the help of third parties for the completion of the construction work. These third party organizations offer help to the organizations for the completion of the various kinds of projects that they have in return for adequate compensation (Keane & Caletka 2015). However, at the same time it is seen that various kinds of disputes often arises among the companies or the organizations which are involved in such a project and thus these organizations often take the help of legally binding contracts or agreements so as to avoid unnecessary disputes and also to work in an effective manner (Hibberd 2017).
This paper will discuss about the factors that affect the construction contracts and also the manner in which the effectiveness of these contracts can be improved. The paper will first try to explain the meaning of the construction contracts and the factors which affect the success or the failure of these contracts. The paper will next discuss about the disputes related to compensation, timeline for the completion of the project and also the quality of the completed project that the organizations involved in a particular construction contract often have to undergo. Finally the paper will end with some recommendations like the use of effective negotiation process, relationship management, lean construction, re-engineering and others for the resolution of the disputes that the organizations and the contractors normally face. The research question for the assignment is as follows:
What factors create an impact on construction contracts and how can their efficacy be enhanced?
A construction contract can be described as a legally binding agreement between two or more organizations which are involved in the completion of a particular project (du Plessis & Oosthuizen 2018). In other words, it can be defined as a legally as well as mutually binding agreement between organization or parties depending of the conditions and the policies which have been recorded in a documented form (Nyström, Nilsson & Lind, 2016). Furthermore, the parties which are involved in the contract can at the same time be seen as the contractors and also the owners of the contract and the terms as well as the conditions are decided to a large extent by the parties which are involved in the process of the contact. However, Ashworth and Perera (2018) are of the viewpoint that the terms of the construction contract of the Australian organizations related to the construction industry should be largely made on the basis of the legislations of the nation and also as per the requirements of the project or the construction.
These construction contracts are important since they outline the compensation or remuneration that a particular organization would be getting on the completion of a project or the manner in which the concerned compensation would be paid (Chaphalkar, Iyer & Patil, 2015). In the recent times, six common types of construction contracts have gained prominence and are being widely used by the Australian organizations related to the construction industry for getting the projects that they have completed by the third parties. The six types of construction contracts are “Lump sum contract, Item rate contract/unit price contract, Lump sum and scheduled contract, Cost plus fixed fee contract, Cost plus percentage of cost contract and Special contracts” (Chaphalkar, Iyer & Patil, 2015). It is pertinent to note that the effectiveness as well as the efficiency of these contracts depends to a large extent on the context in which they are being used.
The success or the failure of a particular construction contracts depend not only on the details which are incorporated with the contracts and but also the manner in which they are implemented by the parties which are involved in the contract (TerHaar, Laney & Levine, 2016). However, at the same time it needs to be said that there are various issues or disputes that the diverse parties which are involved in a particular construction contract often come across either during the course of the project itself or after the completion of the project or the construction work (Walker 2015). The success or the failure of a particular construction project also depends to a large extent on the manner in which these disputes are being resolved by the diverse parties or contractors which are involved in the contract. For example, one of the most common disputes or the issues that the various organizations or the parties often face is the disputes related to the compensation or remuneration aspects (TerHaar, Laney & Levine, 2016). The compensation or the remuneration which a contractor would be getting at the end of the entire project or at regular intervals during the entire course of the project is decided beforehand. However, during the completion of the project it is often seen that the contractors often end up incurring a higher amount of cost because of the various contingent situations, lack of resources and others (Walker 2015).
Another common reason for dispute is related to the aspect of timing for the completion of the entire project or the construction work (Dziadosz, Tomczyk & Kapli?ski, 2015). The time frame within which a contractor needs to complete the project work is always mentioned at the very beginning of the project (Dziadosz, Tomczyk & Kapli?ski, 2015). However, in the majority of the cases it is seen that the contractors fail to complete the project work within the stipulated time frame that has been provided to them and this particular fact leads to serious disputes between the contractors and the parties involved in the process (Hardin & McCool 2015). This particular aspect significantly affects the parties which are involved in the process since as per the terms outlined in the construction contract they have already made their plans and if there is a delay in the construction work or for that matter in the completion of the concerned project then this can adversely affect the concerned organizations.
The process which has been used for the planning of the project or the construction work can at times lead to various kinds of disputes between the contractors and the parties which are involved in the concerned process (Lu et al. 2015). The various projects or the construction works which are planned by the organizations often fail to take into effective consideration the practical aspects that might be involved in the concerned process. It is often seen that the projects that are being developed by the business enterprises often needs amendments or changes when the plans are actually being implemented for the construction or the completion of the concerned project (Lu et al. 2015). This in most cases not only prolongs the time period required for the completion of the concerned project but at the same time in some of the cases it is also seen that the cost or the capital which is needed for the completion of the entire project significantly rises from the amount of capital which was mentioned at the very beginning in the construction contract (Sears et al. 2015). These in short are some of the main issues or the problems which contributes in a significant manner towards the various disputes that the parties which are involved in the construction project often face. At the same time it needs to be said that the success or the failure of the concerned project depends to a large extent on the manner in which the parties involved in the contract attempt or try to resolve these issues or disputes.
The organizations involved in a particular construction contract can also face disputes or issues on the basis of the differences of the organizational cultural followed within the framework of their organizations (Dave et al. 2016). It is pertinent to note that the quality of work done by a particular organization is directly related to the culture followed within that particular organization and thus differences in the cultures of the organizations involved in the contract can significantly impact the outcome of the contract (Dave et al. 2016). In addition to these, disputes can also arise because of technical, legal and other factors (Tezel, Koskela & Aziz, 2018). For example, it is important to note that in the majority of the contracts only the work which is needed to be done is mentioned and not the manner in which it should be done (Tezel, Koskela & Aziz, 2018).
There are various methods that the parties which are involved in the process of the contract can use to effectively resolve the diverse disputes as well as the issues that they have and which are adversely affecting the prospects of the concerned contract. Firstly, in case of any disputes or issues the concerned parties can take the help of the standard negotiation process rather than seeking legal assistance at the first go since the legal proceedings can adversely affect the brand or the market image of all the parties which are involved in the process (Oakland & Marosszeky 2017). Furthermore, if effective negotiation processes are being used then it is likely that the outcome of the concerned process would not only be agreeable to most of the parties involved in the process of negotiation but at the same time beneficial as well. In addition to these, all the parties which are involved in the contracts should ensure the fact at the time of the formulation of the concerned contract there should be clauses for the various contingent situations which might arise during the course of the project (Ning & Ling 2015). It would be much more helpful for all the parties involved in the contract to make all the precepts of the project crystal clear and also the actions that would be taken in case of the failure to adhere to the stipulations outlined in the contract (Ning & Ling 2015). Thus, for the finalizing of a building contract the parties need to take the help of measures like transparency and others that will not only minimize disputes but also maximize the value for all stakeholders.
Recent researches have shown that the majority of the issues or the disputes that the parties involved in a particular contract face are on the basis on three aspects, namely, the compensation or the remuneration involved in the project, the time frame stipulated for the completion of the project and finally the quality of work that has been delivered (Tezel, Koskela & Aziz, 2018). These three factors determine to a great extent the success or the failure of a particular contract as well as the project itself and thus it is seen that the organizations which are involved in the contract often use diverse kinds of principles or strategies so that they are being to resolve or mitigate the effects of these issues or disputes in the most effective manner. Total Quality Management (TQM) is one such strategy which is being used by the various contractors and the effective usage of this strategy is likely to help the contractor to resolve the diverse issues that they face (Tezel, Koskela & Aziz, 2018). This particular strategy enables an organization to maximize the performance level of the diverse workers of their workplace and thereby improve the organizational productivity of the organization itself (Ning 2014). The various contractors can take the help of this strategy to maximize the individual performance level of each of their workers so as to complete the project within the stipulated time frame that has been provided to them (Ning 2014).
The effective use of the lean construction method is another option which is likely to help the contractors to reduce the number of disputes and also to complete the projects in a much cost effective manner (Walker 2015). However, the use of this particular method is likely to require the contracts to undertake a continuous improvement in the various processes of their business and also to take into account the diverse needs of the contractors in a much more effective manner (Ashworth & Perera 2018). This is likely to help them not only in the integration of the entire project activities but also to improve the diverse supply chains which are being used for the completion of the project. In addition to these, the methods of re-engineering, benchmarking and others are also likely to help the contractors to complete the project in a much more effective manner (Sears et al. 2015). Furthermore, the effective usage of the machinery of relationship management is likely to help the contractors and the parties to maintain an effective relationship among each other. At the same time it would also help them to resolve the various issues or the dispute that they are likely to face in a much more effective manner (Sears et al. 2015).
Conclusion and Recommendations
To conclude, the construction contracts have gained a significant amount of prominence within the mould of the business world because of the various kinds of benefits that they provide to the parties involved in the process. Furthermore, for a contract to be a success the concerned organizations at the very beginning needs to decide the terms and also the expected outcomes of the concerned project and also its various related aspects. However, it is seen that inspite of all these various kinds of disputes or issues inadvertently arise among the diverse parties which are a part of the contract. Furthermore, at the same time it is seen that the majority of these disputes are related to the aspect of deadline, compensation and quality. Thus, to resolve these problems in the most effective manner the diverse parties which are involved in the process can take the help of TQM, lean construction and other methods. At the same time it needs to be said that the success or the failure of a particular project depends to a large extent on the effectiveness with which the parties are being able to resolve these disputes.
The organizations for the resolution of the disputes can take the help of the process of negotiation. The effective usage of this particular process will enable the parties which are involved in the contract to arrive at a consensus and thereby help each other in the completion of the concerned project. The parties involved in the process of negotiation can at the same time take the help of the process of relationship management wherein from the very beginning the parties involved in the process would try to maintain a cordial relationship with each other. This particular fact would help them in a significant manner during the resolution of the various disputes and issues. It is likely that through the effective usage of these two recommendations the parties involved in a contract would be able to reduce the number of disputes and complete the project in an effective manner.
References
Ashworth, A. & Perera, S., 2018. Contractual procedures in the construction industry. Routledge.
Chaphalkar, N.B., Iyer, K.C. & Patil, S.K., 2015. ‘Prediction of outcome of construction dispute claims using multilayer perceptron neural network model’. International Journal of Project Management, 33(8), pp.1827-1835.
Dave, B., Kubler, S., Främling, K. & Koskela, L., 2016. ‘Opportunities for enhanced lean construction management using Internet of Things standards’. Automation in construction, 61, pp.86-97.
du Plessis, H. & Oosthuizen, P., 2018. ‘Construction project management through building contracts, a South African perspective’. Acta Structilia, 25(1), pp.152-181.
Dziadosz, A., Tomczyk, A. & Kapli?ski, O., 2015. ‘Financial risk estimation in construction contracts’. Procedia Engineering, 122, pp.120-128.
Hardin, B. & McCool, D., 2015. BIM and construction management: proven tools, methods, and workflows. John Wiley & Sons.
Hibberd, P., 2017. ‘Sustainability–The Role of Construction Contracts’. Future Challenges in Evaluating and Managing Sustainable Development in the Built Environment, pp.268-284.
Hughes, W., Champion, R. & Murdoch, J., 2015. Construction contracts: law and management. Routledge.
Keane, P.J. & Caletka, A.F., 2015. Delay analysis in construction contracts. John Wiley & Sons.
Lu, P., Guo, S., Qian, L., He, P. & Xu, X., 2015. ‘The effectiveness of contractual and relational governances in construction projects in China’. International Journal of Project Management, 33(1), pp.212-222.
Ning, Y. & Ling, F.Y.Y., 2015. ‘The effects of project characteristics on adopting relational transaction strategies’. International Journal of Project Management, 33(5), pp.998-1007.
Ning, Y., 2014. ‘Quantitative effects of drivers and barriers on networking strategies in public construction projects’. International Journal of Project Management, 32(2), pp.286-297.
Nyström, J., Nilsson, J.E. & Lind, H., 2016. ‘Degrees of freedom and innovations in construction contracts’. Transport Policy, 47, pp.119-126.
Oakland, J. & Marosszeky, M., 2017. Total construction management: Lean quality in construction project delivery. Routledge.
Sears, S.K., Sears, G.A., Clough, R.H., Rounds, J.L. & Segner, R.O., 2015. Construction project management. John Wiley & Sons.
Ter Haar, R., Laney, A. & Levine, M., 2016. Construction insurance and UK construction contracts. CRC Press.
Tezel, A., Koskela, L. & Aziz, Z., 2018. ‘Lean thinking in the highways construction sector: motivation, implementation and barriers’. Production Planning & Control, 29(3), pp.247-269.
Walker, A., 2015. Project management in construction. John Wiley & Sons.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download