Chapter 42
Conflict Management and Dispute Resolution
Abstract
The five techniques for resolving conflicts suggested by Thomas and Kilman are discussed in this chapter. These are forcing, confronting, compromising, smoothing and withdrawing. The chapter also describes and explains the fundamental differences of more formal dispute resolution procedures such as conciliation, mediation, adjudication, arbitration and, as a last resort, litigation.
Keywords
Adjudication; Arbitration; Conciliation; Conflict management; Litigation; Mediation; Thomas and Kilman techniques
Conflict management covers a wide range of areas of disagreement from smoothing out a simple difference of opinion to settling a major industrial dispute.
Projects, as life in general, tend to have conflicts. Wherever there is a wide variety of individuals with different aspirations, attitudes, views and opinions there is a possibility that what may start out as a misunderstanding escalates into a conflict. It is one of the functions of a project manager to sense where such a conflict may occur and, once it has developed, to resolve it as early as possible to prevent a full-blown confrontation that may end in a strike, mass resignations or a complete stoppage of operations.
Conflicts can be caused by differences in opinions, cultural background or customs, project objectives, political aspirations or personal attitudes. Other factors that tend to cause conflicts are poor communications, weak management, competition for available resources, unclear objectives and arguments over methods and procedures.
Conflict between organizations can often be traced back to loose contractual arrangements, sloppy or ambiguous documentation and non-confirmation in writing of statements or instructions.
Thomas and Kilman published a study on conflict management and suggested five techniques that can be employed for resolving conflicts. These are:
• Forcing
• Confronting the problem
• Compromising
• Smoothing
• Withdrawing
Forcing involves one party using its authority acquired by virtue of position in the organization, rank or technical knowledge to force through its point of view. While such a situation is not uncommon in the armed forces where it is backed up by strict discipline, it should only be used in a project environment where there is a health and safety issue, or in an emergency posing a risk of serious physical damage. In most of the situations where forcing has been used to solve a conflict, one party almost certainly feels aggrieved with a consequent adverse effect on morale and future cooperation.
Confronting the problem is, by contrast, a more positive method. In this situation, both parties will try to examine what the actual issue is and will make a concerted effort to resolve it by reasoning and showing mutual respect for each other’s point of view. The most likely situation where this method will succeed is when both the parties realize that failure to agree will be disastrous for everybody, and when success will enhance both their positions, especially when it is understood that future cooperation is vital for the success of the project. Often there are useful by-products such as innovative solutions or a better understanding of the wider picture.
Compromising is probably the most common method to resolve disputes, but generally both parties have to give up something or part with something, whether it is a point of principle, a financial claim, pension rights or an improvement in conditions. This means that the settlement may only be temporary and the dispute may well flare up again when one of the parties believes itself to be in a better bargaining position. No one really wins, yet both lose something and it may well be the subject of regret later when the effects of the compromise become apparent. Often commercial or time (programme) pressures make it necessary to reach a quick compromise solution, which means that if these pressures had not existed a more rational discussion could have produced a more lasting result.
Smoothing is basically one party acceding to the other party’s demands because a more robust stance would not be in their best interest. This could occur where one party has more authority or power (financial, political or organizational) or where the arguments put forward are more cogent. Smoothing does not mean complete surrender, as it may just not be opportune or politically wise at this particular time to be more assertive.
Withdrawing in effect means avoiding the issue or ignoring it. While this may appear to be a sign of weakness, there may be good reasons for taking this stance. One may be aware that the dispute will blow over when the other party’s anger has cooled down or a confrontation is likely to inflame the situation even more. One may also feel that the possibility of winning the argument is small, so that by making what may be considered a small concession, good relations are maintained. In practice, this procedure is only suitable for minor issues since by ignoring important ones, the problem is only shelved and will have to be resolved at a later date. If the issue is a major one and unlikely to be resolved by the other four options, it may still be correct for one or both parties to withdraw and agree to take the dispute to adjudication, arbitration or litigation as described later.
Whatever techniques are adopted in resolving disputes, the personality of the project manager or facilitator plays a major role. Patience, tact, politeness and cool-headedness are essential irrespective of the strength or weakness of the technical case. Any agreement or decision made by a human being is to a large extent subjective, and human attributes (or even failings) such as honour, pride, status or face-saving must be taken into account. It is good politics to allow the losing party to keep their self-respect and self-esteem. Team members may or may not like each other, but any such feelings must not be allowed to detract from the professionalism required to do their job.
In general, confrontation is preferable to withdrawal, but to follow such a course, project managers should practise the following:
• Be a role model and set an example to the team members in showing empathy with the conflicting parties.
• Keep an open-door policy and encourage early discussion before it festers into a more serious issue.
• Hear people out and allow them to open up before making comments.
• Look for a hidden agenda and try to find out what is really going on as the conflict may have different (very often personal) roots.
When a dispute involves organizations outside the project team, such as suppliers, subcontractors or labour unions, professional specialized assistance is essential in the form of commercial lawyers or industrial (labour) relations officers.
When the conflict is between two organizations and no agreement can be reached by either discussions or negotiations between the parties, it may be necessary to resort to one of the following five established methods of dispute resolution available to all parties to a contract. These, roughly in order of cost and speed, are:
• Conciliation
• Mediation
• Adjudication
• Arbitration
• Litigation
Conciliation
The main purpose of conciliation, which is not used very often in commercial disputes, is to establish communications between the parties so that negotiations can be resumed. Conciliators should not try to apportion blame, but to focus on the common interests of the parties and the systemic reasons for the breakdown of relationships.
Mediation
In mediation, the parties in dispute contact and engage a third party either directly or via the mediation service of one of the established professional institutions. Although the parties retain control over the final outcome, which is not enforceable, the mediator, who is impartial and often experienced in such disputes, has control over the proceedings and pace of the mediation process. The mediator must on no account show him or herself to be judgemental or give advice or opinions, even if requested to do so. His or her main function is to clarify and explore all the common interests and issues as well as possible options, which may lead to a mutually beneficial and acceptable settlement. Once an agreement has been reached, it must be recorded in writing.
If mediation is started early enough before the differences become entrenched, the possibility of an amicable settlement is high. Provided legal advisers are not employed, the only costs are the fees of the mediator, which makes the procedure much cheaper and certainly quicker than any of the three more formal and legally binding dispute resolution procedures described below.
Adjudication
Although adjudication has always been an option in resolving disputes, it requires the agreement of both parties. This also means that both parties have to agree as to who would be the adjudicator. As this in itself could be a source of disagreement, it was not a common method of dispute resolution until the 1996 Construction Act, more accurately called ‘Housing Grants, Construction and Regeneration Act 1996’ (now replaced by the Local Democracy, Economic Development & Construction Act 2009), was passed. This Act allowed one party to apply to one of a number of registered institutions called the Adjudicator Nominating Body (ANB) to appoint an independent adjudicator. The other party is then obliged by law to accept both the adjudication process and the nominated adjudicator. Certain types of contracts are not covered such as mining (extraction), oil and gas, and power generation.
The process of adjudication has to follow strict procedures which can vary slightly depending on the ANB, most of whom have produced their own set of adjudication procedures. In the absence of such an ANB procedure being available, the act requires that the procedure to be followed is that set out in the ‘The Scheme for Construction Contracts (England and Wales) Regulations 1998’ known as the ‘Scheme’. A slightly different scheme applies for Scotland, but most procedures drawn up by the various ANBs follow the principles of the scheme. The initiating party, called the referring party, can choose which ANB to use and can also decide whether to use the scheme or the chosen ANB’s procedure.
The procedure to be followed is as follows:
2. Once appointed, the adjudicator must follow the terms specified in the contract.
3. The adjudicator invites the referring party, to submit details of the dispute, called the referral, which must also be sent to the responding party.
4. The adjudicator issues a programme giving the dates by which the specified documents must be submitted.
5. After about 7 days, the responding party must issue a response in which they put forward their case.
6. The adjudicator then reviews these submissions together with any other papers or evidence he may request, and is obliged to give a ruling (called a decision) within 28 days after the referral. However, the referring party can grant an extension of a further 14 days. Further extension of time is only possible with the agreement of both parties. Although, in the early days of adjudication, the adjudicator had to be requested to give reasons for his decision, in most cases giving reasons is now the norm.
In practice, project management principles should be used, e.g., only one person should be nominated from each party to communicate with the other parties including the adjudicator. Confirmation of receipt for all letters, e-mails and faxes should be requested and filed with the original. As with all documents, it is vital to read the small print.
Originally, the adjudicator dealt direct with the two disputing parties. Now both parties appoint lawyers or claims consultants to prepare their case. This has inevitably increased the cost and led to an emphasis on procedure, often resulting in subjecting the adjudicator to intimidatory tactics and a challenge to the adjudicator’s jurisdiction. As the adjudicator cannot confirm his own jurisdiction, this causes some confusion which may have to be decided by a court.
At times, the decision by the adjudicator is challenged by consultants or lawyers based purely on alleged non-compliance of procedure, and this too will have to be decided by a court.
While a court will generally uphold an adjudicator’s decision, a Court of Appeal ruling in 2012 (PC Harrington Contractors Ltd. v Systech International Ltd. [2012] EWCA Civ 1371) stipulates that if the adjudicator’s decision has been revoked as a result of default or misconduct, the adjudicator loses his fees unless a special clause is inserted in the adjudicator’s contract with the parties, which provides for payment even in the event of an unenforceable decision. Fees charged by the adjudicator are levied jointly and severally, so that if one party refuses to pay, the other party is liable for payment including interest for late payment.
Arbitration
Many contracts contain an arbitration clause, which, in the case of a dispute, requires the parties to either agree to the appointment of an arbitrator or ask one of the recognized chartered institutions to appoint an independent arbitrator. The arbitrator asks for submissions from both parties (preferably in writing), and has the power to open up all the books and documents relating to the dispute, call witnesses and seek expert opinions. In most cases, both the sides will be assisted by legal and technical advisers, which could generate considerable costs. Unlike an adjudicator, the arbitrator has the right to award all or part of the costs of the case against one or both of the parties as he sees fit. Generally, there is a three-month time limit, but this can be extended by the arbitrator, if necessary.
In some cases, especially in overseas contracts, it may be necessary to appoint two arbitrators. If these cannot agree on an award, the matter has to be resolved by a third person called an umpire.
In a technical dispute, the arbitrator should ideally be an expert in that field, but if the dispute is of a non-technical nature, it may in the end be better to have the matter resolved by litigation, i.e., in the courts. This, however, means that the privacy afforded by arbitration will be lost.
Arbitration was designed to be speedier and cheaper than court proceedings, but nowadays both parties appoint a galaxy of legal advisers and expert witnesses, which may make arbitration as, if not more, costly as court action. As with adjudication, it is now necessary for the arbitrator to give reasons with his decision.
Litigation
Any dispute can be taken to court whether it is technical, contractual, financial, legal, environmental, personal, etc., provided that there is an applicable basis for legal action. A court procedure which is more formal, and, being in open court, lacks the privacy of arbitration, involves the employment of solicitors and barristers who present the case to the judge. In addition, there will be expert witnesses recruited by both parties whose evidence may be given under oath and be subject to cross-examination. If such proceedings are not settled before they go to trial, they tend to be very expensive both in terms of the award and subsequent damages, if the case is lost, and also in costs, i.e., the court fees and especially the legal fees incurred by both sets of legal teams, which can soon escalate if the case takes many weeks or months. Further, the rules of what evidence can be presented and how it is presented are not as flexible in court as they are in arbitration. Finally, the court timetable and the need to comply with certain pre-trial procedures may mean it can take some months or even years for a litigation case to get to trial. For these reasons, every effort should be made to settle technical and contractual disputes by one of the other two methods of dispute resolution. In fact when an arbitration clause is part of the contract, a court will require the arbitration procedure to be followed before permitting it to be heard by a judge.
The benefits of litigation are that the services of the judge are free and the ruling could be of public interest thus acting as an important precedent for future cases. Furthermore, although there is certainty of enforcement of the award, there is a right of appeal to a higher court.
Needless to say, a well-managed project, benefiting from the use of tight but fair and equitable contract documents and change procedures, should never require the project manager to invoke any of these stages. Most arguments and disagreements should be resolved as early as possible by discussions and negotiations before the dispute festers and anger turns into hostility.
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