Types of Business Organizations,

Prevention and Settlement of Disputes

Labor problems, Labor Organization
by: Engr. Waseem Shah
LECTURE 14

CE-407 PROJECT PLANNING, MANAGEMENT AND ENGINEERING

ECONOMICS (FALL 2017)
Contents

 Introduction
 Business organizations
 Disputes
 Labor Issues
 Introduction

 Money in eyes of
modern investors

Engr. Waseem Shah, CED, UET-P

Introduction
 If one has money, certainly one would like to invest it in either of the following ways;
 To fulfill individual/joint unlimited wants and needs
 To invest for earning more money (in cyclic way)
 In modern economies the unlimited needs or wants and limited resources have been
arrogated/hijacked by interest rates (emerging from libor rates) and the personal
corruption of individuals and/or groups.
 A successful business, given the exposure to modern risk levels, is the survival of fittest.
 Thus, to reach the above level of investments you need to form some organized
structure of a plateform, which will facilitate you along the way.
 Such an organized plateform is known is Organization.
 Different types or forms of organizations can be clicked and adopted.
 Disputes, labor problems etc may be subject of matters to form an organization.

Engr. Waseem Shah, CED, UET-P

Types of business organizations
 Choosing a Form of Business Organization is governed by several interrelated and
interdependent factors.
 The nature of business is the most important factor. That is some businesses cannot be
succeeded unless a joint venture is undertaken.
 The volume of risks and liabilities as well as the willingness of the owners to bear it. The scale of
operations i.e. volume of business ( large, medium, small) and size of the market area (local,
national, international).
 Which organizational form is most appropriate can be influenced by
 Tax Issues,
 Legal Issues,
 Amount of capital required
 Financial Concerns, and
 Personal Concerns

Engr. Waseem Shah, CED, UET-P

Types of business organizations
 Types/Forms of business organizations
 Sole Proprietorship
 Partnership
 Corporation
 Sole Proprietorship: A Sole Proprietorship is owned and operated by one individual
doing business.
 Sole Proprietorships are the most numerous form of business organization in many
countries.
 Examples: The shops or stores which you see in your locality — the grocery store, the
vegetable store, the sweets shop, the chemist shop, the mobile accessories shop, the
stationery store, etc. come under sole proprietorship.

Engr. Waseem Shah, CED, UET-P

Pros and cons of Sole Proprietorship
Advantages of Sole Proprietorship:
 Ease of formation and dissolution.
 No registration
 No profit sharing
 Easy decision-making
 Typically, there are low start-up costs and low operational overhead.
 No corporate income taxes; Any income realized by a sole proprietorship is declared on the
owner’s individual income tax return.
Disadvantages of Sole Proprietorship:
 Unlimited liability. Owners who organize their business as a sole proprietorship are personally
responsible for the obligations of the business, including actions of any employee
representing the business.
 Limited life; In most cases, if a business owner passes away, the business dies as well.
 No medical insurance to employees
Engr. Waseem Shah, CED, UET-P
Types of business organizations
 Partnership: A Partnership consists of two or more individuals in business together. it can
be defined as a relation between persons who have agreed to share their profits and
losses in an agreed ratio.
 With a partnership, financial resources are pooled and put into the business. You can
establish the terms of your business with your partner and protect yourself in case of a
disagreement or dissolution by drawing up as specific business agreement. As partners,
you would share in the profits of your business according to the terms of your
agreement. Types of Partnerships are:
 General partnership, is an agreement between two or more people who share equally
in the profits and liabilities of a company. This can be as informal as a verbal agreement
made over coffee or a formalized contractual agreement between partners. There are
no requirements for business structure or governance; it is entirely up to the partners to
define how the company is to be run and who runs it.
 Each general partner receives profits and losses as personal income and the company
itself is not taxed on earnings.
Engr. Waseem Shah, CED, UET-P
Types of business organizations
 A disadvantage of being a general partner is the unlimited liability (i.e. debts and
obligations to creditors, legal suits, and any other financial obligations) that you face.
 For example, if someone brings a legal suit against the general partnership, both
partners will be defendants in the suit. Moreover, even if you did not engage in any
misconduct, if the court finds the general partnership guilty, then both general partners
will be held financial responsible for the outcome of the suit.
 Limited Partnership: Such partners will be liable only for the amount of capital each one
invested into the business. Limited partners do in fact enjoy direct access to the flow of
income and expenses.
 Generally, limited partners are not liable for the total and complete debts and
obligations of the company.
 Here business partners are proportioned against liabilities of business and personal assets
thus get protected.

Engr. Waseem Shah, CED, UET-P

 Pros and cons of Partnership
Advantages of Partnership:
 Partnerships are relatively easy to form, however, considerable thought should be put into
developing a partnership agreement at the point of formation
 Partnerships may be subject to fewer regulations than corporations.
 There is stronger potential of access to greater amounts of capital than sole proprietorship.
 No corporate income taxes. Partnerships declare income by filing a partnership income tax
return. Yet the partnership pays no taxes when this partnership tax return is filed. Rather, the
individual partners declare their pro-rata share of the net income of the partnership on their
individual income tax returns and pay taxes at the individual income tax rate.
 It is a Synergy. That is, there is clear potential for the enhancement of value resulting from two
or more individuals combining strengths.
Disadvantages of Partnership:
 Unlimited liability; The General partners are individually responsible for the obligations of the
business, creating personal risk.
 Limited life; A partnership may end upon the withdrawal or death of a partner.
 Possibility of disputes or conflicts between partners.
Engr. Waseem Shah, CED, UET-P
Types of business organizations
 Corporation: It is an autonomous association of persons who voluntarily cooperate for their
mutual social, economic, and cultural benefit.
 Public corporations are owned by shareholders who elect a board of directors to oversee
primary responsibilities.
 Along with standard, for-profit corporations, there are charitable, not-for-profit corporations.
 Capital is raised through shares which are transferable.
Advantages of a Corporation
 Limited liability of the shareholders/promoter
 Can easily raise capital
 Have unlimited life
 Ease of transfer of ownership
Disadvantages of Corporation:
 Formation is not easy with excessive Government regulations
 Subject to Corporate Tax and Dividend Tax (Double Taxation)
 Delay in policy decisions and controlled by a Group
Engr. Waseem Shah, CED, UET-P
Disputes
 During the performance of the contract, disputes may arise between the employer
(client), engineer (consultant) and contractor for various reasons of default in
performance, progress payment, rates, time, etc.
 The performance of engineering projects is inked in Project Specifications. The
commitment levels of different parties involved are enshrined in Contract Documents.
 The interpretation of these project health detectors may vary from individual to
individual as well as time to time and place to place.
 Such a difference gives rise to Disputes among two or more parties.
 The disputes arise when one party finds another at a difference with itself.
 The size of difference determines the size of dispute. Some may require lawsuits others
may be resolved in-door.

Engr. Waseem Shah, CED, UET-P

Disputes
 Once conflicts/disputes escalate for a while, they often reach a stalemate: a situation in
which neither side can win, but neither side wants to back down or accept loss either.
 Stalemates emerge for a number of reasons, i.e. failed tactics, depletion of available
resources to fuel the dispute, a reduction in support of the dispute by group members or
allies or costs becoming too high to continue.
 A point reaches where the costs of continuing the struggle exceed the benefits to be
gained. This situation is known as “Mutually Hurting Stalemate (MHS)”.
 Dispute on Kalabagh Dam has reached its MHS.
 The disputes can be settled the
following;
 Mediation
 Arbitration
 Litigation

Engr. Waseem Shah, CED, UET-P

Settlement of Disputes
 Mediation is an informal and confidential way for parties to resolve their disputes with
the help of a neutral third party — a “mediator” — who is trained to help people discuss
their differences. The mediator does not decide who is right or wrong, nor does he (or
she) issue a decision. Instead, the mediator helps the parties work out their own solutions
to their problems.
 If parties are unable to resolve their dispute through mediation, they are still free to seek
recourse through litigation or arbitration.
 Arbitration is a private method of dispute resolution in which the parties select the
individual or individuals (“arbitrators”) who will decide the matters at issue following a
process agreed upon by the parties. Arbitration is generally faster, less expensive, and
more confidential than litigation. Compared to litigation, however, parties in arbitration
have fewer options to appeal an arbitration award if they disagree with it. There are a
number of private organizations that provide arbitration services.

Engr. Waseem Shah, CED, UET-P

Settlement of Disputes
 Litigation refers to the use of state or federal (depending on the claims asserted, the
amount at issue, and where the parties reside and thus may ultimately either reach at
High court or Supreme Court) court processes to resolve a dispute according to the rules
in place in that jurisdiction.
 The court procedures governing litigation are highly formalized. Cases in litigation are
heard by a judge and/or jury. This is the sort of the dispute resolution process that most
people are familiar via media, e.g..
 Litigation is generally something people seek to avoid. It's expensive, time consuming,
emotionally draining and unpredictable –- until a judge or jury decides the case, you
can never be certain of the outcome.
 However, parties in litigation have more options to appeal a verdict if they disagree with
it. The appeal may move from civil court to district court to high court and so on.

Engr. Waseem Shah, CED, UET-P

Prevention of Disputes
 Regardless of which method you choose to try to resolve your dispute, you are always
free to settle your dispute with the other side; and the party who initiates the complaint
is free to withdraw his or her complaint at any time prior to — or even during — a formal
trial (litigation), arbitration, or mediation.
 Comprehensive but concise, clear and simple language contractual terms and
conditions and precautional act on them can best prevent disputes.
 Negotiation can be called for while sitting representatives of the parties and resolving
the issue without involving a third party. Negotiated amicable settlement is the
endurable, quick solution, which requires mutual trust, cooperation, give and take
policy, flexibility instead of rigidity of one's view, and vision for future relations.
 Hence, Negotiation may prove safeguard to any further proceedings ever tried for, like
arbitration or litigation and thus prevent disputes at latent stage.
 Unresolved disputes can conveniently be resolved through arbitration, which bears the
stamps of law of natural justice, than resolution in court. Here all the proceedings can
be within the private ear and eye. Non-prevented disputes thus be resorted to litigation.

Engr. Waseem Shah, CED, UET-P

Labor Issues
 Labors are the ultimate crew which deliver the output of a certain project. Their
superintendents may be assigned as their correspondents to the upper chairs of an
organization.
 Different disputes may be addressed by the labor force.
 Since they may not be aware of legal or documentary privileges awarded to them, the
engineers must not take it for granted to override their legal rights.
 There resides a labour law enforced in each territory, like, Saudi Labour Law.
 Labor problems can partially or completely resolved using such laws.
 However, some problems may be project or organizational specific and must be
addressed through proper conveyance of the agreements signed.
 The agreements must enshrine relevant local rules and regulations. Engineers are white
color Labors.
 The appointment letter is the way of legal encroachments. You are bound to follow
them and they are your only responsibilities which bound you to the job.

Engr. Waseem Shah, CED, UET-P

Labor Problems
 The cost base (e.g. standard rate) and their corresponding basis for computing vary
with the company/organization/department accounting system and the prevalent
regulations (like labour law) at the project site.
 Provisions are made for expenditures like
 Overtime
 Tool cost used during the job
 Bonus
 Pension
 Insurance and taxes
 Medical insurance
 Accommodation
 Mess overheads
 Airfare and annual leave etc. etc.
 Labor Problems may arise due to lack of assurance of above by the concerned heads.
Engr. Waseem Shah, CED, UET-P
As per Saudi Labour Law

Engr. Waseem Shah, CED, UET-P

(K/L)

Engr. Waseem Shah, CED, UET-P

Labor Organization
 Proper provisions for labor usage at site are to be observed;
 Safety Measures (IOSH, NEBOSH, Safety engineers)
 Fire Brigades
 Training sessions
 Conflict of interests in job duties (exact skills assignment to activities)
 Decrease of idle time
 Developing teams
 Motivating interpersonally
 Communicating through foremans
 Assuring privileges and reducing criss-crossing of duties
 Timely promotions

Engr. Waseem Shah, CED, UET-P

 Q/A-SESSION

You must be both Artistic and

Scientific to be an Engineer

Engr. Waseem Shah, CED, UET-P