Measures to Reduce Dispute in Projects
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Transcript of Measures to Reduce Dispute in Projects
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MEASURES TO REDUCE DISPUTE IN PROJECTS
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Programme on Emerging Trends in Contract Management & Dispute Resolution.
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Maj.Gen Nilendra KumarDirector, Amity Law School
& Dean, Faculty of Law
Amity University
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What is a Project?
A project in business is typically defined as a collaborative enterprise.
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It may also be termed as a temporary endeavor undertaken to create a unique product, service or result.
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Examples
1. Project for construction of new key location plan.
2. Married accommodation project.3. Project to augment water supply.4. Building of new hospital.
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What is a dispute?
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Dispute means
A quarrel, controversy or an angry altercation.
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Differing claims or divergent perceptions.
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Why do the disputes take place?
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What leads to disputes or in other words the causes for disputes?
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COMMON CAUSES
1. Trade Union rivalry.2. Labour unrest3. Legal intervention4. Management of funds resulting in
shortage
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5. Delay in obtaining regulatory clearances
6. Land acquisition problems
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Reasons for delayed clearances
1. Environmental 2. Security3. Safety4. Overriding authority of other
agencies or departments
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Nine categories of delay
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Delay at project level
Original contracts duration is too short
Legal dispute between various parties
Ineffective delay penalties
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Owner Group
1. Delay in progress due to payments by owner
2. Delay to furnish and deliver the site to the contractor by the owner
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Example
In fighting amongst co-owners of land
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Contractor Group
1. Difficulties in financing project by contractor
2. Conflicts among subcontractors engaged in execution of the project
3. Re-work due to errors during construction
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Consultant Group
1. Delay in performing inspection and testing
2. Delay in approving major changes in the scope of work by consultant
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Example
1. Remove plinth protection2. Steel door frames instead of teak
wood
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Design Group
1. Mistakes and discrepancies in design documents
2. Delay in producing design documents
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May be due to rivalry or lack of adequate accountability
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Material Group
1. Shortage of construction material in market
2. Changes in material types and specifications during the construction
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May be shortages in steel, cement, bricks or sanitary fittings
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Equipment Group
1. Equipment break down 2. Equipment shortage
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Labour Group
1. Shortage of labour2. Unqualified work force 3. Low productivity level of workers
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External Group
1. Effects of subsurface conditioning (e.g. soil, high water table)
2. Delay in obtaining municipal permits
3. Hot weather effects on construction activities
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Effect of a dispute
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Dispute may lead to a lock out
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LOCK OUT
A lockout is a temporary work stoppage or denial of employment during the course of a dispute. It is initiated by the management of a company.
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How to resolve the dispute?
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OVER ALL OBJECTIVE
To end the dispute make efforts to remove or reduce tension or conflict.
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A dispute mechanism is a structured process that addresses disputes between two or more parties.
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Dispute mechanism offers an effective tool for establishing communication channels between the parties.
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Call the other side. At the first stage, get into a
dialogue. Talk it cover. Give a patient hearing.
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Negotiation is a dialogue between twoor more people or parties, intended to reach an understanding, resolve points of difference to work out an agreement upon course of action.
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However, negotiations may not always succeed to resolve the dispute.
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EXAMPLES
Singur Tata Nano Controversy. The land acquisition controversy
during 2008.
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Maruti Suzuki industrial unrest at Manesar, Haryana during Oct 2011
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KUDANKULAM NUCLEAR POWER PLANT
Protest by thousands of persons against the plant fearing a Fukushima like disaster.
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TATA MOTORS
Forced to abandon their project in West Bengal.
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CONSTRUCTION PROJECTS
Judicial intervention on account of low payments for land acquired in Greater Noida.
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As of January 1,2013 of the total 566 infrastructure projects in India, 276 were delayed. The estimated cost of these projects was above Rs 150 crores.
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Causes for the project delayed was due to green clearances and other reasons.
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The list of delayed infrastructure projects include the $90 billion Delhi-Mumbai industrial corridor and the $12 billion Posco Steel Project.
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TIME & COST OVERRUNS IN DRDO PROJECTS
Costs have gone up from an original estimate of Rs 3,300 crores to over Rs. 5,789 crores.
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DISPUTE RESOLUTION METHODS
1. Judicial2. Extra judicial
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MEASURES TO REDUCE DISPUTES
1. Anticipate and seek all regulatory clearances.
2. Forecast realistic financial implications and arrange funds.
3. Strict adherence to environmental norms.
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1. Establish and maintain cordinal labour relations.
2. Effective use of ADR to sort out differences.
3. Vigilant defence of litigation.
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OTHER EFFECTIVE TOOLS
1. Periodic reviews.2. Web based monitoring system.
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Prepare for the worst case scenario. Keep a safety time.
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Education and training of engineers
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Measures initiated by the Prime Minister of India during June 2012
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Setting up of an investment tracking system. This will review projects periodically to ensure that issues are quickly identified and resolved.
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Public sector projects with an investment of Rs 10 billion or more will be monitored by National Manufacture Competitive Council.
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Judicial Method
1. Judicial Recourse2. Arbitration3. Mediation4. Lok Adalats
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Arbitration
It is a technique for the resolution of disputes outside the courts, where the parties to a dispute refer it, to one or more persons (the arbitrators) by whose decisions they agree to be bound.
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APPLICABLE STATUTE
The Arbitration
and
Conciliation Act, 1996
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Based on UNCITRAL Model Law on international commercial arbitration and conciliation.
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The process of arbitration can start only if there exists a valid arbitration agreement between the parties prior to the emergence of the dispute.
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Arbitration can be either voluntary or mandatory.
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Mediation
A settlement of a dispute or controversy by setting up an independent person between two contending parties in order to aid them in the settlement of their agreement.
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A mediation has often been defined as assisted negotiation.
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The mediator’s primary role is to act as a neutral third party who facilitates discussion between the parties.
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Mediation differs from arbitration in which the third party (arbitrator) acts much like a Judge but in an out of-court less formal setting but does not actively participate in the discussion.
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Advantages of Mediation
Cost of litigation much less Confidentiality Control Compliance Mutuality Support
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CONCILIATION
Conciliation is an ADR process whereby the parties to a dispute use a conciliator who meets with the parties separately in an attempt to resolve their differences.
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It is a less formal form of arbitration
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Any party can request the other party to appoint a conciliator. One conciliator is preferred but two or three are also allowed.
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If a party rejects an offer to conciliate, there can be conciliation.
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PRINCIPLES
1. Non-adversial nature of proceedings 2. Voluntary nature of process3. Flexible procedure 4. Decisions are recommendatory
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LOK ADALAT
1. ‘Lok Adalat’ means people’s court. 2. There is no court fee; and no rigid
procedural requirements.3. Pending cases in regular courts can
be transferred to a Lok Adalat, if both the parties agree.
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4. The focus on ‘Lok Adalat’ is on compromise. When no compromise is reached, the matter goes back to the court.
5. Every ‘Lok Adalat’ is deemed to be a civil court.
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ADVANTAGE OF TIMELY COMPLETION OF PROJECTS
L&T ‘s Q2 net up 42.5% on completion of projects.
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CONCLUSION
Timely completion of projects with optimal use of resources not only influences the profitability of the company but also gives it competitive advantage.
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The process of dialogue mutual accommodation and a positive approach would contribute to dispute resolution.