What is essential to achieve a fitness-for-purpose product on project completion and to ensure compliance by the various contractual stakeholders lies in the terms and conditions of contract. A great deal of difficulty has however been reported throughout the construction industry reflecting the problem area relating to contract clauses. and consequences are of various levels, all affecting costs, human effort, works quality and time.
With the increasing complexity of construction projects and huge funding expended, contract documents are becoming much more complicated to incorporate the objectives, requirements and expectations of owners and contractors. As a result, problems arise and claims are so common that they are becoming a way of life. the following major causes have for decades received special attention.
Mr. Bui Quang Luong made a case study that focused in the most significant contract clauses in the construction industry and their impact on project performance under various contract types. His objectives are to: (1) study the problems pertaining to construction contract clauses that have significant impact on project performance; and (2) provide strategic and specific recommendations on the drafting of construction contracts.
Based from his study, the problems that usually arise in the construction contract are related to international construction contract clauses. Contract preparation is considered vital to achieve improved project performance. Thorough contractual arrangements therefore play a crucial part in the process. It is important that the most problematic clauses be identified so that significant project impact can be successfully controlled. As a result of year-long research using the individual clause, clause family and contract type analysis approaches, nine most problematic clauses were consistently identified as being of primary concern and significantly impacting project success.
His study has successfully demonstrated an intensive exploration on the importance of contract clauses in the international construction business. A focus has been analyzed and found to be the most troublesome clauses that have significant impact in project performance. The findings resulted from thorough analyses based on individual clause, clause family and contract type analysis approaches. it is therefore important to take into special consideration the nine most problematic clauses that statistically and realistically affect contract execution and project delivery in terms of (i) frequency of occurrence; (ii) rates of major disputes; (iii) degree of seriousness; and (iv) frequent clarification.
His thesis abstract is copied and posted.
Abstract
Clauses are an essential part that constitutes a construction contract document. However, throughout its history the industry has witnessed a substantial number of disputes/conflicts of interest unfortunately characterized by the contract itself. Things are nowadays being made more complicated by a trend of long agreements where poorly drafted clauses are held responsible for even further project delays and worse, litigation. The main purpose of the study is to conduct an intensive exploration into the most problematic contract areas and to seek clauses that stand out as the most troublesome, and find appropriate strategic and specific recommendations to improve them. It is of prime importance that the contract strategy be formulated that gives a comprehensive picture of what has to be done to secure successful project delivery and to minimize losses and damages as a result of disputes and litigation. In addition, the careful drafting of contract clauses must be given utmost priority. During the course of execution, the owner’s behaviour towards the contractor should be on a fair and risk-sharing basis through careful risk allocation, cooperation and negotiation. Any negligence or lack of due care in these regards will eventually have to be paid for through large contingencies, disputes and litigation.
Some suggestions have been pointed out throughout his study; it is worth noting that contract preparation among other factors determines project delivery success. The drafting of contracts must receive special care and consideration should successful contract execution be achieved. A summary of the most common problems and proposed practice can be found in the following table.
