MBA CPM

FOURTH SEMESTER
CASE STUDY-DISPUTE AVOIDANCE AND RESOLUTION

After completing your MBA in CPM from a premier Real Estate School of Built
Environment at YATIMAUniversity, you have been hired by an Indian MNC P& L Ltd.
(Professional & Loyal). The company had earlier made a mark in the construction industry in
India and abroad but have inherited many legal cases involving disputes in the last few years.
Business Development Team of P&L-Consultants had been under intense pressure to get
more business as more and more Projects were suffering financial losses. There were many
disputes between the various stake holders and large amount of time, energy and money was
being spent in litigation. Mr. Badnaam Singh-Head of Contracts of P&L Consultants who
interviewed you was very impressed with your knowledge of Contracts. He gives you a file
(Appendix A), which contains details of a case and asks you to advise him on how the
company should ensure that:
(a) Disputes can be avoided to the maximum extent in future.
(b) In case it is not possible to avoid them, how they should be managed and resolved
expeditiously.

Based on above prepare address the following in the Report:

(a) Part I-Dispute Avoidance
1. Explain various root causes of Disputes during various stages of the Project?
2. Critically examine and analyse the causes.
3. Discuss how the Disputes could have been avoided.

(b) Part II-Dispute Resolution

1. What were the options as per international standard Forms like FIDIC etc. available to
both the parties so that Disputes could be resolved without undue delay?
2. Critically examine the Dispute Resolution mechanism in the details provided by SS in
the Case File.
3. Analyse various options and Recommend the measures/sequence of Actions aimed at
timely Dispute Resolution.

Submissions:
Your Report should include the following:

1. Executive Summary.
2. Aspects as per (a) and (b) above.

Soft Copy and Hard copy to be submitted latest by 23 Feb 2015 (10 AM)
PPT presentation as under:
a. Sub Group 1- 23 Feb 2015 (Tutorial)
b. Sub Group 2-02 March 2015 (Tutorial)
 DAADR-CASE STUDY
APPENDIX A
P&L Consultants had engaged a team of young graduates BBA Unrecognised (UR) from a
newly established at School of Unbuilt Environment under Lovely Laddoo University, Gr
Noida to aggressively market their expertise in Real Estate Design and Consultancy
Management. Very impressive looking Brochures and Video Films were brought out and
presentations made to prospective Clients claiming that their Company will provide
absolutely flawless designs at very low prices.

A major client Defeated Developers Ltd (DDL), which had floated an RFP included a price
clause in its RFQ Document. Fearing that they might lose the attractive bid to the other
competitors, P&L quoted a price which was rather low (Rs 20 Crores). DDL was surprised to
note that the price quoted was not only the lowest, it was also lower than their in house
estimates, based on which the Company had arranged funds from Financial Institutions.

After receipt of the Price proposal from many bidders including P&L Consultants, an award
was made to them being the lowest bidder. There was considerable delay in finalization of the
Contract and the work was begun based on a Letter of Intent. Work began in a hurry and
plans and specifications were not vetted by any other experienced Staff member. There were
clashes between Structural Designs and Architectural Drawings. Though a pre bid meeting
was held, it was attended by relatively junior members and most queries were not answered
properly. As per the Terms of contract, all disputes were to be dealt under the jurisdiction of
Local Court. There was no other reference to any other Dispute redressal mechanism. A
relatively junior member of P&L staff Mr Ye Dil Maange More who had completed his PG in
Structures a couple of years ago was assigned to help Mr Shaitan Singh-Head of contracts in
his duties and was made responsible to oversee the Design and Consultancy effort as the
Head of Contracts wanted to concentrate on other pressing engagements.

As the foundation is being dug, the earthwork sub-contractor reports unexpected sub soil
water, requiring a major dewatering effort. If you report to the Client, he would find it
difficult to digest any change order and its financial impact. Therefore the General
Contractor is prevailed upon not to press for extra claims as he is promised to be looked
after as the work progresses. He agrees in the interests of a good working relationship.

As the work gets delayed and costs of dewatering/idling of resources increases, the General
Contractor wants to cash in on the favour granted by him. He submits the shop drawing
which shows a proposal involving substitute of a key MEP equipment, which is cheaper. In
the absence of any inputs from other MEP staff, Mr SS asks Mr Ye Dil Maange More for his
advice, who says he has no idea about the substitute. Though Mr SS has never heard of the
manufacturer, he feels it appears realistic. Fearing further delay, you ask Mr Ye Dil Maange
More to redesign and let the proposal pass, in the belief that the Contractor is fully
responsible as per specifications.
As the work proceeds, initial bonhomie (good relations) turns sour and the Resident Engineer
is unable to handle the situation arising out of conflicts and inconsistencies in plans and
specifications. There was considerable delay in releasing the Payments and advances due to
delay in Contract finalization/signatures. Though P&L Consultants had a good policy for
training of Design, Quality and Project Management staff, no such training was ever
conducted. Responsibility of Project Manager fell on Mr Ye Dil Maange Mor by default.
Site Review meetings were held in frequently and Progress Review and Resources Records
were not maintained in an orderly fashion.

Change orders are being demanded by the General Contractor, in the absence of proper
procedural arrangements set out in the contract and therefore remain pending. Contractor
presses ahead with the work regardless, fearing huge losses. Very soon he submits Notice of
major claims. He hires a law firm and submits massive claims both real and imaginary based
on sub-contractor and supplier losses and including initial claims presumed dead. Mr SS
invokes contractual clauses so far ignored by both parties and sends a response rejecting the
Claims on the ground that there was inadequate Notice as per Contract and other procedural
requirements for change orders. Also having accepted the payments, the Contractor had
waived his claims Soon a Law suit follows.

The case drags in courts for years and finally the Court rules in favour of the Contractor with
Interest. The Total amount of Claims was Rs. 10 Crores and the Interest was Rs. 6 Crores.