Legal Sociological Impacts on Business Assignment – Based on Kuwait Construction Industry
Even the best of a design remains just a design, unless it has been converted to reality by building operations. These operations usually require a formal agreement both in the general and the public sector context. The agreement sets out to specify the cost of the operations, how they should be performed and allocate risks accordingly. In other words, a contract is set up. The conversion of a brilliant design to brilliant buildings requires a brilliant contract that reflects the various expectations of the parties involved, and in turn meets all the demands of the project. One of the most essential skills required by a Contract Administrator is to select and manage a building contract. Before selecting and confirming on a particular contract, the key criteria must be considered, allocation of risks must be done as appropriate and then the contract should be finally made. (Local Government Task Force 2011)
Till recently, construction contracts were not treated as a special class by law, rather they were considered to be a part of a larger category called contracts for work and materials. This was then changed in the Part II of Housing Grants, Construction and Regeneration Act 1996 that lays down special rules that are applicable to construction contract. A Construction Contract is any agreement that is given in writing, under which the concerned party carries out any of the following operations:
- To carry out construction functions.
- To make arrangements for other construction operations to be carried out.
- To provide the required labour and resources to carry on construction operations. (Murdoch and Hughes, 2008)
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Law plays an important role in the design and construction process and hence it is necessary to have a clear understanding of the various law sources. This also makes impact on framing the construction contract. Thus everyone involved in the overall construction process must be aware of the legal procedures and the impacts they have on the construction contract. Thus the construction contract is an important document that determines the success or failure of a construction project (Sweet and Schneier, 2008).
Definition of construction contracts
The New Engineering Council Contracts: A Legal Commentary, by Arthur McInnis (2001) states: “Professor John Uff QC reported that the NEC (National Engineering Council) is a new creed that Project Management techniques can be successfully written into a main contract to produce more cooperation, more efficiency and fewer disputes. There is also, of course, the implicit assumption that the terms of the contract can affect the way in which the contractor performs the work. The boldness of the new approach cannot be overstated”.
What is a contract?
A written contract is a document which is self-explanatory. It tells the rights of contractor and clients. It also explains when and where some of the changes can be made in a contract. A contractor has to finish the work that has been agreed in a contract. In case problems occur during or after the agreed time, contract law provides a way to settle issues. The main points of an effective contract are as follows:
- An effective contract saves time and money
- An effective contract specifies the responsibilities of contractors and clients
- An effective contract provides quality in work
- An effective contract provides equal opportunities and competition within and across organizations
- An effective contract specifies the roles of project managers in a project
- An effective contract provides more advantages than disadvantages
- An effective contract isolates hidden issues and problems in the construction industry (Boyce, 1992)
Why do we need contracts in the construction industry?
The worldwide construction industry is increasing in productivity. It has been noted that construction companies and clients are increasingly facing problems resulting in court action. Although the time scales in Europe are less than in other developed countries, a lot of money is spent on unproductive tasks. It has also been noted that lawyers are increasingly preparing cases and arguing in the courts for decisions. Construction companies can simply appoint lawyers to suggest the inclusion of all clauses at the start of a contract and this would limit the chance of litigation between parties. Hence, it is inferred that contracts are very important in the construction industry (Smith, 2001).
Why do we use sophisticated contracts?
In terms of sophisticated contracts, it can be argued that these contracts include each and every related item concerning contracts in construction (Murdoch and Hughes, 1996). The main points of such contracts are as follows:
- Contract terms.
- Contractor’s obligations.
- Employer’s obligations.
- Responsibility for design.
- Starting and completion time.
- Modes of making payments to the contractor.
- Responsibility for insurance of workers, in case of accidents.
- Responsibility for health and safety legislation & measures.
- The sub-contracts.
- Termination of contracts.
These points provide depth of knowledge and information, and this is the reason they are called sophisticated contracts. Clauses are included in the contracts in regards these points. All those involved in a particular contract know exactly what their roles and responsibilities are. The basic philosophy behind the sophisticated contract is to safeguards the interests of both or more parties in a contract. Time is money, and indeed very precious. Therefore, sophisticated contracts save time and eventually money.
Construction laws cover wide range of issues starting from contract law, guarantees and securities, bonds, construction claims, tenders and other related contract issues. There are many stakeholders in the construction industry on which these construction laws are applicable which are financial stability putting money into projects, architects, builders, engineers, surveyors, planners and workers etc (McInnis, 2001). These construction contracts relates with the general principle and frameworks which include payment security, regulation of local byelaws for construction and environmental planning etc.
In Kuwait construction industry the major issues which are handled through construction laws relates to the contracts and subcontracts, liability arising in different kind of contracts, insurance and performance issues and disputes related to the project management in construction industry. The construction laws followed in Kuwait are quiet similar to the laws which are followed in oil and gas industry.
In order to regulate and document the construction law which are applicable in Kuwait construction industry there has been an active society of construction law which review and amend the construction law as per requirements (Smith, 1989). The main objective behind establishing such a legal body is to have fair and simple construction byelaws so that both client and contractor know their liability and in case of any dispute they can fight for their legal rights.
The importance of construction contracts
The increase in disputes in the construction industry has urged planners and implementers to act differently. The resources of the construction industry have been shifted, and instead of producing quality in construction, project managers are increasingly involved in the lengthy process of eliminating problems, barriers, and thus disputes. In reality, disputes arise between the clients and the contractors due to a lack in understanding of procedures and principles.
Harris and McCaffer (2001) highlighted the importance of construction contracts while discussing ‘Modern Construction Management’. They found that the precise arrangements in a construction project would vary depending upon the contractor’s involvement in the actual construction. They also found that during contracting, the site labor force responsibilities have been totally neglected, including lack of a team approach, and a lack of coordination between the client’s advisors and contractors.
Harris and McCaffer further discussed the role of head offices in cases of large construction projects. More significantly, the role of the contractor’s project manager is changing because of their involvement in other activities. The civil engineer and site supervisor are seeing changes in their work, which suggests a change in construction processes. Ultimately this situation demonstrates the applicability of construction contracts in the real sense.
Stockdale (2000) discussed prime contracting and emphasized the biggest barrier to successful prime contracting is the role of soft management issues, such as staff, skills and partnerships. Hence in order to enhance the contracting facilities an efficient management should be there which is expert in handling work related issues such as the staff and other. Also management should give due focus to the skills which employees of the company have with them and can be used at workplace. In order to ensure better work skills either such employees should be hired who are having very good skills or management should focus on imparting technical skills to their employees so that they can work efficiently (Egbert, 2008). Collier (2005) discussed construction ethics. Undoubtedly construction management is an applied discipline, and Collier highlighted that while working practically; the researchers encounter according to the circumstances of real life problems. In simple terms, the complex issues and problems such as time, cost, delay and even management issues are settled according to the conditions in a project. The ethical issues need to be researched according to the complexity of the problems.
Construction contracts, including sub-contracts
Turner and Turner (1999) highlighted the decision regarding time. It was found that under Joint Contracts Tribunal (JCT), the architect was responsible for allowing extension of time. So in the case of BalfourBeattyBuilding v. Chester mount Properties (1993), the architect was asked to postpone to an extent that was fair and reasonable.
Construction contracts are properly designed documents, which impose responsibilities upon those who are involved in a construction project. Main construction contracts are awarded on a competitive basis. Sub contracting can be defined as the process in which main task can be divided into small parts and each task is done by specific person and organization that are having experience in doing these works. The main objective behind hiring a sub contractor can be either to reduce the cost for accomplishing the task or to mitigate the risk of project which can be enhanced by carrying out the task. Sub contractors are having high degree of specialization in the task carried out by them which saves time and task can be done with high accuracy as well (Bramble and Cipollini, 1995). There are basically two types of subcontractors which can be given as below:
- Domestic subcontractor: Domestic subcontractors are those which are employed by main contractors so as to form a part of the main contract. These subcontractors are hired by the main contractors in order to supply or fix the material forming part of the main task carried out by the main contractor. These are also known as the named sub contractors.
- Nominated subcontractor: Some of the contracts are given in such a way that the nomination is given by the architect or supervising authority and these authorities reserves all rights for the selection of subcontractor (Schwartz and Swain, 2011). Main contractor here is not concerned with the subcontractor and just provide attendance while he makes profit by employing the subcontractor.
Chappell and Powel-Smith (1994) discussed the main contract in reference to JCT, and further indicated that sub-contracts are approved by the Association of Specialists Engineering Contractors. However, if the sub-contractor is in breach of any of their obligations, without prejudice the sub–contractor has to pay the total cost involved to the main contractor.
Chappell and Powel-Smith also indicated that major works in a construction project are carried out by sub-contractors. The major contracts are developed in line with the JCT standard forms.
Powell–Smith (1989) reported that most standard format construction contracts have clauses under which the client is asked to pay to the nominated sub-contractors directly, if the main contractor fails to do so.
Powell–Smith reported one case study regarding a sub-contractor: In 1981 in Re Arthur Sanders Ltd, a trust of the retention monies was awarded to the sub-contractor. Most importantly, Mr. Justice Nourse expressed very clearly and announced that the British Eagle decision does not affect the general position, because in the British Eagle case, the House of Lords decided differently. However, the sub-contractor was considered to be part of the contract.
The fault of sub-contractor in design
Knowles (2000) explained the roles of contractor and sub-contractor in the design of a building project. According to JCT 98, the main contractor is not responsible for design work taken by the sub-contractor.
However, Knowles summarized that the main contractor will be responsible for design faults if there is a clear statement to that effect in the main contract. Therefore, it stands with the agreed documents signed by both the main and sub-contractors.
Knowles reported a case study in which defects in design were not considered the fault of the sub-contractor: During 1984 there was a problem with ceramic tiles falling off the exterior face of a building at Manchester University. Many tiles fell off and Manchester University put a case against Hugh Wilson and others. Judge John Newey said that the architects would have warned their clients, but as far as the contractor is concerned it was not their responsibility.
McGuinness (2000) presented the issues for sub-contractors through contract management. McGuinness stressed the need for Specialist Trade Contractors (STC) to make sure there was protection under the Housing Grants Construction and Regeneration Act 1996 (HGCR). He argued that this is a need that should be identified before starting any work. The way in which the contracts are written, and the language used within should also be equally understandable to all concerned. In case any problems occur, the STC should check the details of the agreement, as they should satisfy point 107(4) of the HGCR Act 1996.
Contracts versus Covenants
Martin and Songer (2004) carried out research where contracts versus covenants were tested with integrated project delivery systems. It was found that the contract basically segregated the owner, designer, and contractor. However, project delivery systems create much interaction between participants. Therefore, a covenant approach is more practical in running the spirits of a contract. Organizational commitment takes the working teams to the level where the teams have to deliver the results of an agreed contract in a construction project. Martin and Songer simply inferred that contracts act in opposition to collaboration, whereas covenants better reflect both trust and effort.
Kuwait construction industry is having practical implementation for both kind of work i.e. contracts as well as covenants. Application of contract is more widely present in the industry where the dealing parties are new or first time contracts are taken by the contractors. Usually in Kuwait for construction of shopping malls and other big commercial construction projects contracts are applied. Application of covenant are limited only to the very big corporate which are having their dealing with the contractor from many years and there is trust and belief among both the parties (Harris and McCaffer, 2001). Analyzing overall construction industry in Kuwait it is implied that application of Covenant concept is very less as compared to contract in industry as covenant has resulted into many big disputes among the parties.
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Griffith (2003) indicated that site managers in a construction project should make sure that sub-contractors are approved by the Council of Engineers. The main contractors should also take care regarding approval of sub-contractors. In case sub-contractors are not approved, this may cause certain problems, especially in health and safety, including the non-application of environmental regulations.
Ashworth (2006) reported that contract forms are printed documents used in the construction industry, which are agreed by the various parties involved in a contract. JCT 98 covers all forms of contract documents. Ashworth presented certain articles of agreement, and in the case of all parties agreeing, they can all sign. However, the following blank spaces appear in the articles of agreement:
- The employer name, contractor, architect, and designer.
- The contract signing date.
- The type of work.
- The drawings in total number.
Ashworth further highlighted the importance of contract conditions, and held that these are various responsibilities in the main contract. The general conditions are:
- Quality of work.
- Time and cost.
- Insurances of employer, supplier, and sub-contractors.
Articles of Agreement
Articles of agreement include employer’s requirements, contractor’s proposals, and employer’s acceptance.
This is the first step in starting a construction contract, where the employer will supply all drawings and costs of the project.
This is the second step that is taken, where the contractor comes up with their suggestions for the project.
The third step is again the responsibility of the employer, where they accept the proposals of the contractor, and the job is awarded. The contractor may bring new proposals to be accepted by the employer.
Terminology used in contract documents
Cox (1993) discussed the various terms that are commonly used in construction contracts such as parties, documents, finance, and program of work, insurance and warranties.
The role of project managers in construction contracts
Ashworth (2006) explained that the employer appoints a project manager. Thereafter the project manager appoints design specialists, and eventually selects a contractor. The project manager is responsible for all drawings and advertising the work in newspapers. Various contractors apply through proper documentation. The project manager compares the information given by the contractors, and hence selects the contractor. Therefore, the main function of a project manager is to organize and coordinate design and construction programmers. The project manger’s further role is to look after the interests of the employer. This includes cost, time, quality, and overall management of the project.
Johnston and Mansfield (2001) advocated that the balance in planning and organizing of project activities can produce good results through the supervision of project managers. They further indicated that project managers analyze previous projects and list any shortcomings so that previous errors are not repeated in the future.
Project managers should create systems to feedback to companies. The feedback system must work in a 360-degree model. This means that project managers should be updated regarding project activities. In simple words, information regarding project activities should be shared and reported to project managers. It also suggests the applicability of teamwork. Teams should pass on information to project managers, thus creating feedback systems.
The role of architects, designers and suppliers
If we divide the different phases of a construction project, then we have to accept that architects, designers and suppliers have a central role in building construction. Their roles also remain important in concluding contracts in construction. In simple words, the clients appoint architects after obtaining planning permission from the respective local authority. Architects visit the site and discuss with the client their requirements, and then produce a drawing. The designer will also put forward a design for the site. Suppliers are appointed by the contractor for supplying materials required for the building. So, architects, designers and suppliers are all part of the construction contract.
Ashworth (1997) discussed the architect’s instruction with reference to contractor and client. It was found that architects should communicate with the contractor in writing in all situations; failing to do so may not be helpful for both contractor and architect. It is also noted from Ashworth that if after 7 days of receiving a request for information the contractor does not respond, then the client can change to a different contractor.
Wild (1997) held that the architect is the employer’s representative and named as administrator of a contract.
Construction design information
Bownass (2001) reported that for a project to be successful, the design should be acceptable and hence be signed off by the client and design team, or project team. In case some changes are inevitable, these should be incorporated by those concerned. Changes in the original design cannot be made unless agreed by all.
Turner (1997) also emphasized that design functioning needs to include the contribution of architects, civil and mechanical engineers, quantity surveyors and cost consultants.
Ashworth (1997) stated that suppliers are of different types. For example cement suppliers, sand and bricks suppliers, plaster and timber suppliers. He further stressed that there must be a written contract between the supplier and contractor or client, depending on the original contract.
Knowles (2000) reported a case regarding fixing of a stone in 1956. The case was between Leeds ford Ltd v. The City of Bradford. The architect requested that stone be obtained from the Empire Stone Company Limited, 326 Deans gate, Manchester or any other approved firm. The contractor fixed the stone but it came from a different, non-approved company. There was a huge difference in price, as the desired company’s price was £1250.00, and the contractor bought the stone from another company at the lower price of £500.00
The matter was referred to the court by the contractor who claimed the difference in the cost of stone.
It was held by the court that the contractor is liable to fix the same stone as was indicated by the architect.
3.8.4 Liquidated Damages:
Murdoch and Hughes (1996) highlighted the importance of liquidated damages in construction. In case the contractor needs to extend the time needed to complete the construction project, the owner or client can claim damages from the management contractor subject to whether they are in turn able to recover them from the works contractor. Murdoch and Hughes also referred to Clause 3.21 of MC 87, which explains that the management contractor is bound to take all necessary steps in finalizing the contracts.
Ashworth (2006) discussed liquidated damages and emphasized that the standard forms of contract give rise to claims of agreed damages when the completion of work is not within the stipulated time. These types of payments are called liquidated damages. In the case of commercial buildings, liquidated damages are calculated on the basis of loss of profit, but this is very difficult to determine in the case of roads.
Turner and Turner (1999) reported that delays are the main cause of liquidated damages. They further pointed out that allocation of responsibility is the reason for liquidated damages in construction contracts.
Cox and Townsend (1998) pointed out that clients would prefer to fix a price with contractors. Contracts can state that costs are reimbursable when a design is incomplete. Cox and Townsend further pointed out that in the majority of countries contractors know the real costs of a construction project, but not the clients.
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Standardization of construction contracts and risks
Boyce (1992) reported that there are many advantages in the application of standard conditions where contracts are concluded. It was further found that by using standard conditions, there is significant reduction in tender and contract documents, and disputes are also minimized. There are some disadvantages of using standard conditions in construction contracts, and although they are easy to use, they prevent users from being able to review particular conditions. Therefore, Boyce warned against using standard conditions. Hughes and Greenwood (1996) reviewed the construction contracts used in the UK. They indicated that those who draft the construction contracts in the UK do not consider the potential applications, and hence the contract remains unattractive. Hughes and Greenwood examined construction contracts as to whether or not diverse objectives can be included within then. The present standard forms of contract used in the UK are not popular amongst clients and contractors. This all suggests that there is a need to amend the standard forms of construction contract used in the UK.
Ashworth (2006) indicated that risk is inherent in the design of a building. Risk can simply be defined as the initial risk of a project and its outcome. Risk can be of different types, not specifically monetary gains or losses only. It includes unsatisfactory design, which may adversely affect a designer’s reputation with the result of loss of commissions in the future. In simple words, risk is hidden in the design of a building, and also after construction, when for example a leak may suggest weaknesses within the building. Consequently, this will affect a designer’s reputation, and may even destroy the market value of the designer.
Ashworth also indicated that risks in construction projects vary according to the circumstances. Therefore, sometimes it is beyond the control of a contractor, and resultantly the contractor can be isolated from the competition.
However, Ashworth suggested the following factors that should be considered:
- Risk evaluation.
- Risk sharing.
- Risk transfer.
- Risk control.
Baxendale (2002) also discussed risks during his study ‘The progress of partnering in the construction industry’. The risks in the construction industry are clearly known to contractors as well as clients. However, good practice can reduce or even eliminate the risks.
Construction contracts which are made in Kuwait are somehow different from the kind of construction contracts used in UK. In UK due to usage of standard terms and conditions of contracts these remain quiet unattractive for the client and contractors as well. When we compare the same scenario for the Kuwait construction industry these construction contracts are amended in order to have flexible terms and conditions which can be fixed at the time of signing the contract between the client and contractor. There are many advantages of deciding the specific terms and conditions for the contracts at the initial contract time as it will lead to ample amount of clarity in the terms and conditions which are present for contract (Martin and Songer, 2004). In Kuwait construction industry due to presence of these flexible terms and conditions for contracts where in client and contractors can frame conditions as per their requirements would allow better understanding and working relations.
Risk in general contracting
Contract documents explain every point in detail. However, sometimes the parties involved are not careful in the beginning and end up facing major problems. An example of this is reported by Murdoch and Hughes (2000), where a contract was made between a contractor and a representative of a church in Liverpool. The contractor completed the job but left a hole in the structure. Rainwater began to penetrate into the building. The architect was held responsible because he did not make the employer aware of this point.
Mosey (2006) stressed that only joint risk management could reduce the risks of price in a construction project. Both parties also need to ensure the time of applying these working arrangements is correct.
Types of risk in construction contracts
Abrahamson (1984) and Bunni (1985), cited in Murdoch and Hughes (2000), discussed the types of risks and concluded:
There are general risks that can be experienced in any construction projects. Risks include physical risks (ground conditions, defective materials, weather conditions, time and finance), delay and disputes (possession of site, late supply of information, and delay in finalizing the deeds), damage and injury to persons and property (lack of insurance, lack of warranties, and a lack of cover in case of accidents), and law and arbitration (delay in finalizing disputes, delay in producing records of the project, and imposing ones own decisions).
Role of governments in construction contracts
Various governments have passed legislation in regards construction contracts. Issues, disputes and un-resolvable points that occur in construction oblige the elected bodies in any democratic country to pass such laws and rules.
Simpson (2005) discussed adjudication clauses, including a Construction Act complaint procedure. Simpson referred to The Institute of Civil Engineers publication, a third edition of the NEC contract called NEC3, published on 14th of July 2005. In this publication all existing documents were put in line, along with the following points. NEC3 now includes the following:
- Engineering and Construction Sub- contract.
- Engineering and Construction Short Contract.
- Engineering and Construction Short Sub- Contract.
- Professional Services Contract.
- Adjudicator’s Contract.
Murdoch and Hughes (2000) wrote about ‘Regulators’ and categorized legislation as planning legislation, building control legislation, and health and safety legislation. In the UK, planning control starts from the Town and Country Act 1947. This Act relates to how local areas in a town can be developed. In simple words, the planning department of each local authority gives permission to construct any new building, including making alterations to existing structures. Building legislation refers to nationally defined standards. The Building Act 1984 provides details regarding standards, and The Health and Safety at Work Act 1974 is also relevant in this regard. All this kind of legislation has been passed by the House of Commons.
McKendrick (2003) highlighted the significance of contract law, and further indicated that as the UK is a member of the EU, some instructions have to be included in contract law, as and when desired by the member countries. Members of the European Parliament (MEPs) pass legislation for member countries. Therefore, the UK Government has to act upon EU legislation, as well as legislation brought in by the House of Commons.
Arbitration, Litigation and Negotiation
Disputes can arise between the contractual parties. It is a known fact that disputes often arise because of financial involvement. Arbitrators are used in cases where time, cost and quality matter. Therefore, the services of arbitrators have become very important in recent years. There is also no doubt that the cost of using an arbitrator is less than using specialist lawyers.
Murdoch and Hughes (1996) presented information about arbitration and noted the following points:
- The arbitrator’s award would be definitely implemented.
- The arbitrator need not be written in the original contractual agreement, and it is left to the professional bodies to nominate a suitable person.
- ICE 6 clause 66 prohibits either party from seeking help from an arbitrator until the dispute has first been considered by the engineer. JCT 80 does not have a similar restriction, but emphasizes that the dispute cannot be taken to the arbitrator unless the work reaches practical completion.
Murdoch and Hughes (1996) described that litigation is set in motion by either party issuing a notice, and if there is no response, then a writ is served on the other party.
Ashworth (2006) explained that negotiation can help when disputes arise between clients and contractors. Ashworth indicated that disputes often arise because of misunderstanding, lack of communication, and mode of payments. Negotiators act with permission from the parties involved in a dispute. This can be helpful before any court proceedings begin.
Cultural differences and contracts
The pace of the industrial revolution, especially in the west, has taken national companies to international level. These companies are now working across national borders. Companies are multi-disciplinary. Usually, international companies first make contracts with governments. With an influx of new companies, management has been urged to recruit staff from other countries. This can cause project managers to encounter a host of cultural differences. At this point, staff skills play a role in identifying and eliminating any threats to companies.
Stockdale (2000) discussed ‘Prime Contracting’ with reference to ‘The Cultural Dimension’. The focus of the study was cultural interfaces, where managers were asked to act with great care. Cultural differences can destroy company structure, and so a company will not be able to compete at all levels in the market. Basically, Stockdale inferred that one cannot divorce one culture from another. Therefore, managers are required to handle cultural issues tactfully.
Ogunlana (1999) emphasized that the application of ISO9000/BS 5750 to Total Quality Management in the British construction industry has urged companies to look into cultural issues. The UK is a multi-ethnic society. Therefore, top management, project managers and managers need to use skills to break down the barriers of cultural difference. There is no doubt that such differences can generate certain issues that often remain unresolved. Greenwood et al (2003) discussed ‘culture depth’ while presenting information regarding “improving construction update”. They found that waste action was not implemented, because many staff was not free to act accordingly. They indicated that this was only possible if the leadership of a company was determined to act.
Culture depth means that leadership does not provide the guidelines for waste action. Obviously, it is the responsibility of leadership to break down the barriers of cultural differences. Greenwood et al also suggested certain approaches to improve waste management. More significantly they suggested that leadership must look at cultural issues within their organization.
Benefits of construction contracts:
Ashworth (2006) listed the advantages of a contractor centered approach, including:
- Acceptable time management.
- One way responsibility.
- Inherent build ability.
- Control of price.
Ashworth (2006) also identified some disadvantages:
- Employers still need to have consultants for making payments.
- During arguments between client and contractor, the emphasis could deviate the work situation.
- Inclusion of payment clause
Expected Sociological Impacts
There are various negative impacts that could occur with respect to construction contracts even from the point of view of stake holders. A few of these impacts are as below:
- Construction projects provide hopes of employment to the local people. Not all of their expectations are fulfilled at all times. This causes disappointment among them.
- The wage expectations of construction workers are usually much more than that of labour that is imported. This again causes loss of jobs for the local people.
- As a result there is accumulation of migrant workers that result in economic disruption, loss or reduction of loss of purchasing power equality among the local people that again leads to social issues like alcoholism, crime, gambling, etc.
- Tensions between the local community of migrant workers, as well as the intra- and inter-community enmities, which could have serious potential of causing violence
- Construction wage levels being in excess of the other market levels for example, agriculture, leading to reduction in number of workers and in turn reduced maintenance and performance of the overall project.
- Fewer wages would mean expensive housing, food and other services for the labours.
- And lastly, the serious impacts of employee-sub-contractor cost-cutting after the construction are complete (IFC, 2012).
Other sociological impacts on the construction contracts in Kuwait construction industry can be given as mentioned below:
- Construction contracts require usage of the several natural resources such as the water; soil and energy which needs to be taken through nearest available resource and this consumption affect the sociological balance. Hence complete resource plan should be devised before starting the construction project so that later on there are no disputes (Ashworth, 2006).
- Pollution is another major factor which can affect the society and there can be legal disputes at the construction sites. Hence during the project pollution should be controlled to the local byelaws.
- Waste material coming out of the construction sites needs to be dealt with care so that there are no adverse social impacts on the construction contracts.
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All the relevant information regarding construction contracts has been presented above. However, it is important to point out certain major aspects in construction contracts. It can be seen that the practicing of construction contracts is the need of the construction industry. There is also evidence that even if a written agreement exists between the contracting parties, there can still be disputes. Construction companies are spending a great deal of resources in finding solutions to these disputes. Specialists in contract writing are still not in a position to write the exact agreement that is needed in its correct format. The requirements of clients are damaging the contract situations, and consequently the same is seen when we talk about contracts. The risks to humans in the construction industry are increasing and as a result construction companies have to increasingly pay compensation to those affected.
Parliaments have passed and are passing different laws regarding construction contracts, but the implementation of such laws is changing according to the current circumstances. The rapid growth in the construction industry means that there is a dire need of relevant, sophisticated laws and their appropriate implementation.
The role of designers, architects, project managers and specialist lawyers is under great threat in regards construction contracts. There are many cases of disputes in the courts. Judges are deciding on the various disputes, but at this stage there is still a demand to do more. The industry has had to depute the services of arbitrators, negotiators, and lawyers to reduce the numbers of disputes.
Cultural differences persist in all societies; this is especially the case for companies who working across international boundaries. The differences in cultural aspects can only be minimized to some extent and cannot be isolated completely. At this point, competent project managers set aside the differences through a teamwork approach or organizing social gatherings. All of these issues give rise to a need to find solutions through effective construction contracts. Hence, this will follow the research methodology, where various approaches will be discussed to address the issue of construction contracts.