Effective management strategies for construction contract disputes

Abstract

Purpose

Contract risk management has become a critical mission, as contract issues may lead to a loss of vast amounts of money to parties involved or cause project failure. This study sought to identify effective management strategies to mitigate construction contract issues that might emerge during construction.

Design/methodology/approach

A quantitative research approach was adopted for the study. Structured questionnaires made up of close-ended questions were distributed to construction professionals in South Africa via the SurveyMonkey platform. The data were then analysed using descriptive statistics.

Findings

The findings indicate that the critical sources of contract-related disputes are ambiguous definitions of the contract parties' scope of their rights and obligations, lack of precise arrangements regarding the calculation of contractual penalties for failure to meet the deadline, lack of detailed specification of the works and specific milestones, lack of provisions regulating changes to the project documentation during the construction stage, an excessive amount of contractual penalties on contractor's side and lack of provisions regarding the rules of performing additional and replacement works and their settlement. However, for these disputes to be effectively managed, strategies such as reduction uncertainties in project's phases, setting up contingency plans, construction guarantee, extension of time claims, payment guarantee, retention and escalation clause should be implemented by the parties involved.

Research limitations/implications

Even though the empirical study focused on construction professionals in South Africa, the findings could be applied to other countries outside of South Africa.

Practical implications

To effectively manage and prevent contract disputes from averting project failures and losses to parties involved in the contract, construction professionals need to be aware of strategies that must be implemented before and during the project execution. If well implemented, these strategies will help a construction project be successful and experience fewer contractual disputes.

Originality/value

The study has identified the knowledge gap concerning suitable contract risk management strategies available for implementation to effectively prevent any contract parties from losing money, time and project failure.

Citation

Amoah, C. and Nkosazana, H. (2023), "Effective management strategies for construction contract disputes", International Journal of Building Pathology and Adaptation, Vol. 41 No. 6, pp. 70-84. https://doi.org/10.1108/IJBPA-01-2022-0004

1. Introduction

The construction industry in any country, particularly in South Africa, plays an essential role in the economy (De Oliveira, 2012). Large amounts of money are usually set aside for this industry to boost the country's employment rate (Shahhosseinia et al., 2017). Hughes (1997) stated that individuals involved in daily activities within the built-in environment deal with too many construction details that are usually too hard to process. Thus, some individuals are mostly overwhelmed and confused; this confusion usually leads to risks, negatively affecting the construction project's goals. Project risks can be defined as unpredictable events or conditions that may affect the project outcomes in the wrong way (Osipova and Apleberger, 2007). Construction projects can be very complicated, with many interrelated parts that need to be included to achieve all the project objectives. Managing risks during the entire construction project has become a significant procedure. All the construction project's objectives can be met regarding time, cost and quality, not forgetting safety (Banaitiene and Banaitis, 2012). According to Amoah and Pretorius (2020), several risk events that can cause a construction project to be unsuccessful are workmanship-related problems, subcontractor- or main contractor-related problems, payment delays, unforeseen site conditions and inadequate contingency plan, among others.

The parties to a construction contract should try their utmost best to control the risks allocated to them as soon as the contracts have been signed (Banaitiene and Banaitis, 2012). The management of risks assists project members such as the client, contractor, construction professionals and suppliers in achieving their project goals and reducing any potential negative influences on the construction project performance in terms of cost, time and quality outcomes (Banaitiene and Banaitis, 2012). According to Burek (2016), numerous factors can prevent successfully implementing risk management, namely, compiling a risk plan with a lack of understanding of the construction project, risk management not being taken or seen as an essential part of the construction and insufficient time given for the identification and management of risks; finally, a low number of risks identified are not adequately explained for all the individuals to understand. Banaitiene and Banaitis (2012) pointed out that poor implementation of risk management is one of the main reasons for completing projects behind the planned schedule.

The end goal of successfully controlling or managing risks is to minimise unnecessary construction expenses and other occurrences that will slow down the construction site's work progress and effectively solve any misunderstandings (Apollo et al., 2018). Rehacek (2017) mentioned that all risk management approaches should be implemented from the beginning of any construction project to be successful. This study, therefore, aimed to identify effective management strategies that could be implemented to mitigate construction contract disputes.

2. Literature review

2.1 Contract risk management

According to ProSidian Consulting (2011), contract risk management aims to reduce the risk of loss by managing and controlling contract risks effectively and efficiently. Contractual risks are a prominent “blind spot” in many businesses' risk management and internal audit (TOAL, 2018). Management must demonstrate adequate control of all the financial reporting processes, including contractual connections, in today's construction projects, corporate governance and regulatory environment (Turle, 2010). Contract procedures and more efficient and effective controls are vital for businesses to improve operations. ProSidian Consulting (2011) has developed a risk consulting methodology to prevent contract risks from occurring, by focusing on the following:

1. Recognising or having sufficient knowledge about the risks that contracts entail.

2. Developing risk management strategies that include financial, insurance and internal controls.

3. Putting in place solid contractual risk management procedures.

Contract risk management is accomplished by assisting customers in better understanding the general components of contractual liability and risk management, conducting individual contract risk analyses for big new deals and analysing contract portfolios (Turle, 2010). Of course, parties' certainty, consistency, predictability and transparency are needed during contractual agreements (McMillen, 2007). According to Amoah and Bikitsha (2021), a project's riskiness is mainly governed by:

1. The governing models chosen.

2. The contractual agreements dictate how risk is distributed between the parties.

3. Financial products such as insurance and guarantees are used.

During contract implementation, the contract manager should review the risk register regularly (with input from the contracting parties as needed) to ensure that the risks are being managed proactively by those to whom the mitigation measures have been assigned and to identify emerging risks (ProSidian Consulting, 2011). According to The World Bank (2018), before the risk materialises and becomes a bottleneck to contract implementation, any new risk should be examined and mitigating measures assigned.

According to Didraga (2013), project risk management can positively influence project performance by creating a contingency plan or influencing project time, budget or design plans. Also, project risk management can positively influence project performance by creating a contingency plan or influencing project time, budget or design plans. Risk management practices and approaches should improve stakeholder satisfaction and raise the likelihood of a construction project's success (Burke, 2010). According to project stakeholders, different risk management actions are used to influence other stakeholders' behaviour, beliefs and expectations and build and maintain inter-stakeholder relationships (de Carvalho and Junior, 2015).

2.2 Construction disputes and conflicts

According to Sithole (2016), dispute can be defined as an unsolved issue if one of the parties to a contract is not pleased with the decision made. They can hand in a claim or complaint, explaining their disappointment following the contract's steps, but several dispute resolution methods can be used to solve the issue, such as mediation and arbitration. Disputes occur almost every day and are not always effectively controlled (Amoa-Abban, 2017). According to Tolson (2013), the client can disagree with the main contractor if the main contractor does not deliver the completed structure on time. Again, the client can misunderstand financial institutions that offer project funds, or the main contractor can also have disagreements with building material suppliers and construction professionals. Duchaussoy (2019) claims that the construction industry is one of the most conflict-prone and dispute-prone industries, making it one of the most claim-oriented sectors.

On the other hand, Turle (2010) defines a dispute as the inability of two parties to agree on how to resolve a disagreement, and they may seek the assistance of a court. When one individual believes they have a claim against another, disputes occur. A claim can no longer be disputed in court once a court has ruled in its favour; it has attained finality (The World Bank, 2018).

Conflict and dispute are two different concepts. Conflict is defined as a clash of opposing ideas between two or more individuals (Equbal et al., 2017). Conflict involves communication breakdown, which may affect legal relationships between two or more individuals and influence the success of the construction work progress throughout the entire life cycle (Jaffar et al., 2011). Conflicts can be handled to a point where a dispute can be avoided, and disputes are connected with apparent valid issues (Soni et al., 2017). Livolsi (2019) opines that failing to manage construction conflicts can immediately lead to disputes between construction project team members. Conflicts occur regularly in the construction sector because of the many individuals involved. Some have self-interest, large-sized construction projects and huge budgets, but conflicts can be positively resolved through negotiating (Jaffar et al., 2011).

There are two sorts of conflicts in a construction project: internal and external conflicts (Project Management Institute, 2016). External conflicts involve concern only outside project participants, and internal conflicts involved are inside project members, namely, the developer, contractor and construction professionals (PMI, 2016). Construction projects are becoming more complex, resulting in complicated construction legal contracts (Hauptfleisch and Sigle, 2018). To execute modern complex construction structures, disputes are likely to arise because of numerous contracting individuals, poor planning, financial problems and communication breakdowns (Motsa, 2006).

2.3 Causes of disputes in the construction industry

There has been considerable research undertaken to determine the causes of disputes in the construction industry. Several researchers from different countries have analysed the common causes of disputes. Gaum and Laubscher (2019) opine that the primary source of disagreements in the construction sector is a communication breakdown between the developer and the main contractor. Mitkus and Mitkus (2014) state six fundamental causes of construction conflicts in Korea: diverse construction site conditions, local community members' destructions, the difference in variation order assessment, mistakes and negligence faults in design, the excessive quantity of construction works and unclear and double-meaning specifications. Seven categories of construction disputes adopted for this study are listed in Table 1. They are as follows: client-related, contractor-related, design-related, contract-related, human behaviour-related, project-related and external factors (Cakmak and Cakmak, 2014).

However, Livolsi (2019) suggests numerous causes of disputes in construction consulting contracts (see Figure 1). They can either be the managing style used by the parties, the construction professional's conduct, contract or technical details of the legal agreements.

Again, Duchaussoy (2019) indicates various causes for disputes in construction contracts (see Figure 2). These causes of conflicts in construction contracts are unavoidable, such as variation orders, delays, harsh weather conditions or minor errors made by subcontractors that could lead to disagreements (Duchaussoy, 2019). Project managers can genuinely assist in avoiding most disputes and resolve them as they occur by making sure the project goals are clearly defined (PMI, 2016).

2.4 Effects of contractual disputes

The World Bank (2018) states that contractual disputes resolution can be time-consuming, costly and challenging. They can harm the relationship between the employer and the contractor, cause delays and negatively influence contract execution (Karakira, 2018). They could potentially raise the contract price significantly. It is consequently in the contracting parties' best interests to cooperate toward preventing disagreements in the first place (Motsa, 2006). This can be accomplished, among other things, through improving communication and managing the contractor's working relationship (Apollo et al., 2018). To reduce contractual disputes and difficulty, all parties must efficiently carry out their tasks according to the contract (The World Bank, 2018).

2.5 Preventing and managing disputes

According to Livolsi (2019), negotiating is the best method to avoid or resolve any disputes caused by construction contracts. Project managers must understand how disputes can be avoided and have sufficient knowledge about alternative dispute resolution (ADR) methods that can be applied to resolve conflicts (Mnookin, 1998). Usually, resolving disputes requires a third individual to intervene and reach a fair resolution (Equbal et al., 2017). Project participants should know about the usual disputes in construction contracts and ADR methods to apply when disagreements occur (Huggett, 2018). Numerous ADR methods enable the main contractor to manage disputes such as variation orders and poor-quality construction works to avoid time, money and productivity (Resol, 2010). ADR comprises possible methods of assisting individuals in settling any legal misunderstanding before taking the matter through the litigation route (Kumar, 2017). Independent third-party participation is the neutral person who helps by listening to both sides to resolve rising disputes (Nuwan, 2019). Doyle (2012) states that the main goals of ADR are as follows: to avert high costs and delay the project progress to mitigate court overcrowding, ease access to justice and offer constructive dispute resolution. ADR can be quite appealing when the goal is to resolve disagreements or problems cost-effectively, peacefully and swiftly (Al-Ajmi and Makinde, 2018).

3. Research methodology

3.1 Research approach

The research approach chosen for the study is the quantitative research method. It is an appropriate research approach for this study because it allowed the researcher to collect data from more participants regarding the effective contractual management strategies that can be implemented to prevent or mitigate disputes in South Africa. A quantitative research method is intended to establish whether the educated guess, known as the hypothesis, is wrong or right by using numerical values, quantifications and statistical figures (MacDonald and Headlam, 2011). The data collected usually are numeric rather than descriptive information (Fellows and Liu, 2008). Quantitative research uses quantifiable data to explain facts and reveal trends in a study, and it employs data collection approaches that are far more organised than qualitative data collection methods (Jonker and Pennink, 2010).

3.2 Target population and sampling method

MacDonald and Headlam (2011) define a population as the whole group from which a portion of potential participants of the research study is taken. The target population of this study is construction managers, project managers, quantity surveyors, architects and risk managers in South Africa. Convenience sampling was used to select the target population that will be the approach for the research study. Taherdoost (2016) describes convenience sampling as carefully choosing individuals who will participate in the research survey without difficulty or hesitation. Etikan et al. (2016) claim that convenience sampling is best used for a quantitative research study and that it is the most commonly chosen non-probability sampling method. The convenience sampling method was selected for this study because the construction professionals' participants are available or easily accessible to the researcher. It was challenging to identify the estimated total number of each target population as there was no reliable data. Thus, 84 questionnaires were evenly distributed to the respondents in the 9 provinces, of which 58 were duly received. Blumberg et al. (2014) suggest that in a quantitative study, a sample size above 35 is suitable for statistical analysis; thus, Mewomo and Aiyetan (2021) used a total of 50 responses, whilst Amoah and Mlenzana (2022) used 42 respondents for their quantitative studies. Thus, it is acceptable to use 58 respondents.

3.3 Data collection method

Choosing and implementing the best data gathering and analysis approach for all study forms is critical (Pandey and Pandey, 2015). The data collection instrument employed for this research study was a structured questionnaire. The questionnaire was made up of two sections. The first section deals with the participants' demographic data, and the second section is related to sources of contractual disputes and effective contract dispute management practices. The survey questionnaire comprises questions that were formulated using the information from the literature review. The structured questionnaires were distributed to the target population via SurveyMonkey. The questionnaire was closed-ended in a Likert scale for the respondents to tick based on their opinions. The participant filled in the questionnaire by accessing the link sent to their phone or emailed.

3.4 Data analysis

Pandey and Pandey (2015) define data analysis as studying the organised material to discover inherent facts. The data are studied from as many angles as possible to explore the new facts. Because the questionnaire mainly consisted of closed-ended questions, it allowed for quantitative data analysis to uncover patterns and trends on the research topic (Igwenagu, 2016). The data were initially entered into an excel spreadsheet and then translated into a format that could be evaluated statistically. Basic descriptive statistics such as percentages, mean and ranking were calculated from the data. Naoum (2013) explains the descriptive statistics method as an uncomplicated procedure of analysis that indicates a summarised outlook of the results obtained from the collected data; this method uses numerical figures and percentages. The demographic features of the respondents are shown in Table 2.

Table 2 indicates that 81% of the respondents are male, and 19% are female. Also, most respondents (24%) are quantity surveyors, and 33% of the respondents work as private consultant firms in the construction industry. Again, 64% of the respondents have over 5 years of work experience. This means their view on the research topic is and reliable of great value. Lastly, most (25%) respondents are from the Free State.

4. Findings

4.1 Sources of contractual issues

Respondents were asked to rate each source of contractual disputes likely to cause disputes between the parties to a contract, based on their practical experience with contracts, risk management and disputes, using a Likert scale of 1–5, where 1 is strongly disagree and 5 strongly agree. A total of 9 sources of contractual issues were given to the respondents to be rated. According to the findings in Table 3, ambiguous definition of the contract parties, the scope of their rights and obligations (ranked 1, mean score = 4.28), was followed by a lack of precise arrangements regarding the calculation of contractual penalties for failure to meet the deadline and lack of detailed specification of the due date of works and specific milestones (ranked 2, mean score = 4.24). The lack of provisions regulating the introduction of changes to the project documentation during the construction stage and excessive amount of contractual penalties on the contractor's side were ranked third with a mean score of 4.22, followed by the failure to specify the scope of the necessary documentation and the manner of informing the contractor about the activities (ranked 4, mean score = 4.19).

The lowest-ranked source of contractual dispute ranked 10th is inconsistencies between the contract provisions with a mean score of 4.00; perhaps the contractor and the client can quickly identify the disparities and deal with the problem to mitigate the issue from causing the dispute.

4.2 Contract risk management practices

Respondents were again asked to rate effective contractual issues management strategies based on their practical experience in project and contract dispute or risk management, using a Likert scale 1–5, where 1 is strongly disagree, and 5 strongly agree. A total of 12 variables for contract risk management were given to the respondents to be rated. According to Table 4, regular investigations at each project phase reduces uncertainties (ranked 1, mean score = 4.47). This is followed by setting up contingency plans (ranked 2, mean score = 4.41) and construction guarantee (ranked 3, mean score = 4.38). Extension of time claims and payment guarantee were both ranked fourth with a mean score of 4.36. The retention clause in the contract document was ranked fifth with a mean score of 4.34.

According to the respondents, the least ranked effective contractual risk management strategy is public liability insurance, with a mean score of 3.95, which indicates that the respondents do not use this strategy as an effective contract disputes management.

5. Discussion of the findings

5.1 The sources of contract issues in South African

According to the findings, the critical sources of contractual disputes are indicated in Table 3. The study identified failure to meet the deadline and lack of detailed specification of the works and specific milestones causes of contractual disputes. Again, Bowmans Law (2016) identified uncertainties in cost, project period and performance as sources of contract issues that can potentially endanger the success of a construction project. Previous studies have also identified ambiguous definitions of the contract parties' scope of their rights and obligations as sources of the contract dispute. For instance, according to Sithole (2016), the contract issues that might cause disputes during a construction project are misinterpretation of contract terms or contract misinterpretation, inadequate contract drafting, contract termination, ambiguous contract terms and variations in building material quantities. According to Apollo et al. (2018), common issues generating disputes between parties to a building agreement are failing to clearly state the contract parties’ duties and responsibilities during the entire construction agreement period before it is terminated.

However, Duchaussoy (2019) suggests that the sources of construction disputes in construction contracts, such as variation orders, delays, harsh weather conditions or minor errors made by subcontractors, are usually unavoidable. This finding matches the findings of this study that the lack of provisions regarding the rules of performing additional and replacement works and their settlement is a significant source of disputes in the South African construction industry. Again issues such as the managing approach used by the parties, the way the construction professionals conduct themselves and the technical details of the legal agreements can lead to disagreements (Livolsi, 2019). The lack of detailed provisions regarding procedures to be followed for payment of remuneration and reporting defects was also one of the contractual disputes identified by this study. Apollo et al. (2018) also state that a lack of guidelines concerning the regulations of executing extra work and repairing construction works and their payment agreement could lead to disputes among parties. The failure to specify the scope of the necessary documentation and how the contractor is informed about the activities requiring his notification or consent has been stated as one of the significant sources of contractual disputes (Apollo et al., 2018). The nature of the major sources of contractual disputes is human-related, originating from the very people involved in the contract formulation and execution. For instance, contractors may delay the project, yet they dispute the associated consequences for the delay, such as the quantum of the amount payable as a penalty, resulting in a dispute with the client. Secondly, project contracts are often drafted vaguely; thus, parties may find it challenging to identify their rights and obligations and ultimately undertake activities that are not palatable to each other, resulting in disputes. Again, clients and project teams often change the agreed project scope during the construction stage without identifying their implications on the project. More often, having realised the implication of the changes later, one may not agree to abide by the quantity and cost associated with them, resulting in conflict. Therefore, it is prudent for construction stakeholders to be sensitive and vigilant at the project initiation and planning phases in formulating the contract documents and project scope to ensure detailed descriptions are provided and accepted by all parties. This may prevent a lack of role clarity and excessive project scope changes, thus averting or minimising contract disputes among the parties to a contract.

5.2 Effective strategies for contractual disputes management

According to the findings indicated in Table 4, the most effective ways of managing disputes are reducing uncertainties in the project's phases, setting up contingency plans, construction guarantee, the extension of time claims, payment guarantee, retention and escalation clause implemented by the parties involved. According to The World Bank (2018), parties need to efficiently carry out their tasks per the contract to reduce contractual disputes and difficulty. Effective implementation of risk management procedures that focus on proactive actions in preventing uncertain events can prevent disputes (Mnookin, 1998). The effectiveness of implementing contract risk management is not encouraging because managing risks in the construction sector still depends significantly on legal agreements, and this sector is poorly known for being involved in many disagreements and claims (Klemetti, 2006). According to El-Karim et al. (2017), many construction projects are affected by claims and unforeseen events that generate delays and arguments. For this problem to be forestalled, clear contract terms and conditions should be inserted.

Martin and Wu (2016) mentioned that the effective approach that can be implemented to steer away from construction disputes is appointing well-experienced construction professionals such as project managers with the required skills and knowledge to oversee the construction project effectively. Others are choosing the best contractual and procurement models and using an understandable and straightforward legal agreement with an experienced construction procurement lawyer. Lastly, inviting the main contractor to join the design consultants during the planning stage to prevent construction matters, identifying cost-effective design opportunities, allocating risks to appropriate parties that will oversee them and divide the risks fairly are some more factors. To work effectively, project stakeholders should reduce uncertainties in the project's phases. According to the study's findings, setting aside contingency plans in the contract has been identified as effective contractual risk management. Didraga (2013) also emphasised that project risk management can positively influence project performance; the preferred action is setting up a contingency plan for risks that cannot be avoided. According to Othman and Harinarain (2009), successfully implementing a risk management process will benefit the project manager by assisting project managers in attaining all the construction project goals set at the beginning of the construction project. Onengiyeofori (2016) believes that well-structured risk management improves the likelihood of a successful construction project regardless of the uncertainties. Project management aims to get projects to accomplish the construction work required to meet the project's objectives (Burke, 2010). Soni et al. (2017) recommended that implementing suitable management techniques such as construction guarantee and extension of time claims from the developer and the contractor can lead to a dispute-free construction that reduces costs, time and better project execution.

Martin and Wu (2016) give effective approaches that can be implemented to steer away from construction disputes. These include appointing well-experienced construction professionals with the required skills and knowledge to oversee the construction project effectively and including dispute resolution clauses suitable for the construction project requirements in terms of schedule, quality and budget. Proactive steps such as uncertainty reduction in the project's phases and escalation clause can be taken at the beginning of the construction project to lower the possibility of disputes (Amoa-Abban, 2017). Ferreira and Deacon (2019), on the other hand, suggest that the normal actions that need to be taken to avoid disputes are the project team identifying risks and issues immediately, solving modifications as they occur, avoiding claims and reviewing all contract documents for ambiguities, inconsistencies and inaccuracies. Penalty clauses have been used in many construction contracts to resolve issues whereby one party to the contract fails typically to execute project works within the agreed duration (Hauptfleisch and Verster, 2017). It is evident that for the South African construction industry to minimise and manage contract-related disputes effectively, they should reduce project documentation and scope uncertainties. Clarifying contract documents and project scope definition removes the doubt about parties' roles and responsibilities and thus prevents disagreements that result in disputes. The project management team and consultants should advise project stakeholders on the necessity of contingency plans to resolve issues that may result in conflicts. More often, disagreements occur where there is no plan, making the parties uncomfortable as to how to fix the emanated problem. Construction guarantees may also be an effective strategy for the South African construction industry’s stakeholders to minimise disputes among parties. The management of these disputes should be strictly adhered to and enforced. More often, people act carefully when they are aware of the implication of their actions. Thus, if parties to the contract are aware of the enforcement of the rules when they flaunt them, they will refrain from engaging in activities that will hold them accountable.

6. Conclusion and recommendations

Construction projects experience many disputes which may be caused by many factors, including the ambiguous definition of the contract parties' responsibilities, scope of their rights and obligations, lack of precise arrangements regarding contractual penalties, failure to meet the deadline, lack of detailed specification regarding the due date and specific milestones and lack of provisions regarding the rules of performing additional works and their settlement. These disputes, in many instances, generate issues affecting the parties involved and ultimately leading to project failures. The study found that contract risk management strategies can be effectively implemented to mitigate construction-related disputes to improve project performance and achieve project goals. The top three contract risk management practices that were rated the highest by the respondents were regular investigations should be performed during each phase of the project to reduce uncertainties, setting up contingency plans and a construction guarantee. Based on the findings, the study recommends that project managers identify contract risks that could influence construction project performance. Project managers can implement contract risk management strategies to prevent contract risks from causing disputes and negatively affecting project performance. Professional bodies should incorporate skills and knowledge about disputes prevention strategies in their professional guidelines to be aware of them throughout project execution. Property development and construction companies could implement contract risk management strategies to avoid construction-related disputes that may affect the project’s performance. The building industry's participants and professional councils must deal with the challenges to prevent contractual risks by implementing and testing strategies to manage the contractual risks effectively. Future studies should use qualitative research to investigate effective contract risk management strategies to avoid construction-related disputes.

Figures

Figure 1

Causes of disputes in construction contracts

Figure 2

Leading cause of disputes in construction contract

Table 1

Common causes of disputes by categories

Category of disputes	Causes of disputes
Client-related	• Variations initiated by the owner • Change of scope • Late giving of possession • Acceleration • Unrealistic expectations • Payment delays
Contractor-related	• Delays in work progress • Time extensions • Financial failure of the contractor • Technical inadequacy of the contractor • Tendering • Quality of works
Design-related	• Design errors • Unclear specifications • Quality of design • Availability of information
Contract-related	• Double-meaning words in contract documents • Different interpretations of the contract provisions • Risk allocation
Human behaviour-related	• Adversarial/controversial culture • Poor communication • Lack of team spirit
Project-related	• Construction site conditions • Unexpected variations
External factors	• Adverse weather conditions • Legal and economic factors • Fragmented structure of the sector

Source(s): Cakmak and Cakmak (2014), p. 184

Table 2

Respondents' demographic data

	Profiles	Frequency	Percentage
Gender	Male	11	19%
	Female	47	81%
	Total	50	100%
The profession of the respondents	Client	8	14%
	Architect	6	10%
	Project manager	9	16%
	Quantity surveyor	14	24%
	Construction manager	7	12%
	Engineers	5	9%
	Site manager	7	12%
	Risk manager	2	3%
	Total	58	100%
Respondent's employer	Contractor	13	22%
	Property developer	9	16%
	Government department	17	29%
	Private consultant	19	33%
	Total	58	100%
Respondent's work experience	0–5 years	21	36%
	6–10 years	18	31%
	11–15 years	12	21%
	16–20 years	4	7%
	21 years and over	3	5%
	Total	58	100%
Respondent's province	Free State	15	25%
	Eastern Cape	4	7%
	Western Cape	5	8%
	Northern Cape	3	6%
	North West	6	11%
	KwaZulu Natal	6	10%
	Mpumalanga	6	10%
	Limpopo	3	5%
	Gauteng	10	18%
	Total	58	100%

Table 3

Sources of contractual disputes

Sources of contractual disputes	Strongly disagree	Disagree	Neutral	Agree	Strongly agree	Mean score	Ranking
Ambiguous definition of the contract parties, the scope of their rights and obligations	0 (0%)	2 (3%)	3 (5%)	30 (52%)	23 (40%)	4.28	1
Lack of precise arrangements regarding the calculation of contractual penalties for failure to meet the deadline	0 (0%)	0 (0%)	4 (7%)	36 (62%)	18 (31%)	4.24	= 2
Lack of detailed specification of the due date of works and specific milestones	0 (0%)	0 (0%)	2 (3%)	38 (66%)	17 (29%)	4.24	= 2
Lack of provisions regulating the introduction of changes to the project documentation during the construction stage	0 (0%)	0 (0%)	5 (9%)	35 (60%)	18 (31%)	4.22	= 3
Excessive amount of contractual penalties on contractor’s side	0 (0%)	0 (0%)	4 (7%)	37 (64%)	17 (29%)	4.22	= 3
Failure to specify the scope of the necessary documentation and the manner of informing the contractor about the activities	0 (0%)	0 (0%)	5 (9%)	37 (64%)	16 (28%)	4.19	4
Lack of provisions regarding the rules of performing additional and replacement works and their settlement	0 (0%)	1 (2%)	3 (5%)	41 (71%)	13 (22%)	4.14	5
Lack of detailed provisions regarding procedures to be followed for payment of remuneration and reporting defects	0 (0%)	1 (2%)	4 (7%)	40 (69%)	13 (22%)	4.12	6
Inaccurate specification of the form of settlement	0 (0%)	1 (2%)	2 (3%)	45 (78%)	10 (17%)	4.10	7
Lack of detailed regulations regarding the rights under the guarantee and warranty	0 (0%)	1 (2%)	4 (7%)	42 (72%)	11 (19%)	4.09	8
Imprecise provisions regarding the contractual parties' security, e.g. the right to withdraw or terminate the contract	0 (0%)	1 (2%)	4 (7%)	43 (74%)	10 (17%)	4.07	9
Inconsistency between the provisions of the contract	0 (0%)	1 (2%)	6 (10%)	43 (74%)	8 (14%)	4.00	10

Table 4

Contract Risk Management strategies

Variables	Strongly disagree	Disagree	Neutral	Agree	Strongly agree	Mean score	Ranking
Regular investigations at each phase of the project to reduce uncertainties	0 (0%)	0 (0%)	3 (5%)	25 (43%)	30 (52%)	4.47	1
Set up contingency plans	0 (0%)	0 (0%)	3 (5%)	28 (48%)	27 (47%)	4.41	2
Construction guarantee	0 (0%)	0 (0%)	2 (3%)	32 (55%)	24 (41%)	4.38	3
Extension of time claims	0 (0%)	1 (2%)	2 (3%)	30 (52%)	25 (43%)	4.36	4
Payment guarantee	0 (0%)	3 (5%)	0 (0%)	28 (48%)	27 (47%)	4.36	4
Retention	0 (0%)	2 (3%)	2 (3%)	28 (48%)	26 (45%)	4.34	5
Escalation clause	0 (0%)	2 (3%)	2 (3%)	31 (53%)	23 (40%)	4.29	6
Performance bond	0 (0%)	2 (3%)	3 (5%)	31 (53%)	22 (38%)	4.26	7
Professional indemnity	0 (0%)	1 (2%)	6 (10%)	34 (59%)	17 (29%)	4.16	8
Contract delay penalties	0 (0%)	3 (5%)	5 (9%)	32 (55%)	18 (31%)	4.12	9
Maintenance bond	0 (0%)	2 (3%)	14 (24%)	24 (41%)	18 (31%)	4.00	10
Public liability insurance	0 (0%)	1 (2%)	11 (19%)	36 (62%)	10 (17%)	3.95	11