A framework for estimating negotiation amounts in construction projects

Construction disputes can often be resolved using several techniques including: negotiation; mediation; dispute resolution boards; arbitration; and litigation. Negotiation is considered the most preferred technique due to the following facts: first it prevents litigation amongst project parties; and second it keeps a harmonious relationship between project participants. Further, negotiation saves the time, expenses and efforts that are associated with other resolutions techniques. The purpose of this paper is to provide a tool that is geared towards assisting construction contractors during negotiation process.

The framework consists of three modules; duration, certainty and intention. These modules capture the main characteristics of the negotiation process including: the expected claim duration in the case of litigation; certainty of litigation; and contactor's intention to make litigation. The paper also describes the characteristics of these three modules and their associated factors which have been determined based on interviews with claims' experts and questionnaire surveys. Analytical hierarchy process and utility theory are used to determine weights and utility values of attributes, respectively. Decision tree analysis is used to estimate the equivalent monetary value of litigation.

The framework calculates the lower threshold of a claim value with an average error of 12 per cent. A case study is presented to illustrate the practical use of the proposed framework and its ability to determine the minimum acceptable claim amount.

The knowledge of the framework was retrieved from the Egyptian construction industry. However, the utilized methodology can be applied to capture local contraction practices, law and politics in other construction industries.

This paper presents a framework that is developed to assist contractors in calculating the lower threshold of a claim value, which can be considered, during negotiation process with owners.