4 Steps to Successfully Negotiate your next Construction Claim/Dispute

Negotiation – we all do it – and the construction industry has a tendency to do it rather poorly.

Having acted for both the client and contractor it has been my experience that most disputes invariably end up with the parties at opposite sides of the bargaining table in an attempt to hammer out a deal and avoid what would most likely be a protracted and expensive dispute resolution procedure.

Unfortunately the majority of negotiations which I have seen take place on site more often than not result in the parties walking away dissatisfied.

What Drives Such Poor Results?

The party’s dissatisfaction is often rooted in or due to a number of factors:

  1. The parties are not well versed in the intricacies of negotiation;
  2. The parties assume either a hard or soft approach to negotiation – driven by their respective approach to managing conflict (a topic for another day);
  3. Parties negotiate from an entrenched positional basis;
  4. Money is left on the table through poor negotiation tactics;

While the arena of negotiation is a complex one to tackle in a brief article such as this what follows is a practical outline of the classical interest based negotiation which, if followed, may lead to improved results:

1. Separate the people from the problem

Very often what drives negotiations is the emotions and egos of the parties involved. This ultimately culminates in the parties taking an adversarial as opposed to cooperative stance. Tactics to employ to solve this problem are to identify the emotions in the room and improve communication through active listening.

2. Focus on interests, not positions

Here the parties must explore their true underlying interests which underpin their entrenched positions. An example in construction would be the Employer’s interest in an earlier completion date and the Contractor’s interest on reliable and accurate interim payments to support its cash flow.

3. Generate options for mutual gain

In this step the parties come together in an effort to generate alternative possible solutions. The underlying premise is that parties join forces to generate a variety of possibilities for mutual gain i.e. a Win-Win agreement.

We have in the past structured an agreement for a contractor to work over the December by clearly defining the scope to be completed along with the monetary incentive for completing the agreed scope; this was combined with the added incentive that the Contractor could go on leave as soon as the works were completed. The outcome was around 3 months of work achieved in 3 days.

4. Insist on using objective criteria

The final step is to agree on the use of objective criteria for evaluating the various proposed solutions. Naturally this involves the utilisation of fair standards and procedures in assessing the various options the parties have generated. Such standards may include market related prices or mark-ups for overtime.

The above process requires a fundamental shift in the way claims are negotiated.

Parties are encouraged to move away from a rights based approach fueled by entrenched positions towards an interest based approach.

Source: R Fisher & W Ury, ‘Getting to Yes, negotiating an agreement without giving in’ (2nd Edition, Random House Business Books,1999)