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CIAC ARBITRATION

A Practical Way
to Settle Construction Disputes
Engr. P. A. LEONCIO, Jr.
RCE, M.PICE, M.ASCE; RCA, M.PICAM

Engr. POTENCIANO A. LEONCIO, Jr.


RCE, M.PICE, M.ASCE; RCA, M.PICAM

P. A. Leoncio, Jr. & Associates


ENGINEERS

CONSTRUCTION MANAGERS

CONSULTANTS

Engr. P. A. LEONCIO, Jr.


PRINCIPAL:
A Firm specializing in
Construction Project
Management, Organization
Development &
Reengineering

Engr. P. A. LEONCIO, Jr.

CHAIRMAN & Professor (oS):


Civil Engineering Department,
Manuel L. Quezon University,
University Belt, Manila

Engr. P. A. LEONCIO, Jr.


PHILIPPINE INSTITUTE OF
CIVIL ENGINEERS (PICE)
Life Member;
Past National Secretary &
Director of the Board;
Past President of Quezon City
Chapter;

Engr. P. A. LEONCIO, Jr.


AMERICAN SOCIETY OF CIVIL
ENGINEERS, U.S.A.
MEMBER:
CHAIRMAN:
Region 10 Assembly (with 30
International Sections & Groups);

Immediate Past CHAIRMAN:


Region10 Board of Governors.

Engr. P. A. LEONCIO, Jr.


PAST MEMBER:
Board of Direction (Reston,
Virginia, U.S.A.)

Past International
& Region 10 Director;
CONVENOR:
ASCE Philippines (2000)
Served as President; currently its
Executive Director.

Engr. P. A. LEONCIO, Jr.

Asian Civil Engineering


Coordinating Council
Chairman, Technical
Coordinating Committee
(2013-2016) for the 7th Civil
Engineering Conference in
the Asian Region (CECAR 7) in
Hawaii in 2016

Engr. P. A. LEONCIO, Jr.

CONVENOR (1986):
Executive Director
(July 1986-1989)

Engr. P. A. LEONCIO, Jr.

PHILIPPINE CONTRACTORS
ACCREDITATION BOARD
(PCAB)

FIRST EXECUTIVE DIRECTOR


(1981-1985).

Engr. P. A. LEONCIO, Jr.


CONSTRUCTION INDUSTRY
ARBITRATION
COMMISSION
(CIAC)

REG. CONSTRUCTION
ARBITRATOR (Reg. 099)

Engr. P. A. LEONCIO, Jr.

PHILIPPINE INSTITUTE OF
CONSTRUCTION ARBITRATORS
& MEDIATORS (PICAM)
TRUSTEE
CHAIRMAN, International
Conference Committee

Engr. P. A. LEONCIO, Jr.


Pontifical UNIVERSITY OF
SANTO TOMAS (UST)
Bachelor of Science in Civil
Engineering (1971):

Engr. P. A. LEONCIO, Jr.

Reg. Civil Engineer:


PRC No. 12405 (July 1972)

Architecture and Engineering involve the


translation of Design

into REALITY.

CONSTRUCTION is a process.. It picks-up


from the Design and Bidding stages and
ends up with the completion of the project..

These complex activities have great


Cost Implications..

Construction
consist of the
building/assembling
of infrastructure
elements.

A Construction Contract is an agreement


entered into by the Project Owner and the
Contractor with the intention of creating a
legal obligation between the parties. Breach
of contract can lead to damages.

The PRODUCT:
a Building, a Bridge, a
Road, a Dam, pipelines)

Similarities
between
CONSTRUCTION CONTRACT
and
MARRIAGE CONTRACT

Owner&Contractor Husband&Wife

Construction

Marriage

Product

Result

House

Home

Dispute

Disagreement

Suspension
Reccision
Termination

Legal Separation
Annulment
Divorce

Being the case, disagreements, disputes and


conflicts of interest are not uncommon.. It is a
way of life in construction contracting.

When is there a
Disagreement ?

When TWO individuals


see things differently..

Who do you think


won in this fight?

The General Contractor and the Construction


Manager may disagree whether the specified rebars
were installed.. When they do, they may be said to
have Disagreement in Belief (objective)

But when they disagree


that the attitude of the
Contractors Project
Engineer is not
cooperative enough, the
disagreement manifested
is rather a difference in
feelings about the matter,
it is then a Disagreement
in Attitude (subjective)


Honest disagreement
is often a good sign of
progress.
Mahatma Gandhi

A Disagreement can
however, lead to a
DISPUTE,

In a Dispute, Claims
would be involved;
There might also be
Counter- Claims

A DISPUTE would
also involve an
assertion of a right,
or a demand on
one side..

and met by
contrary claims or
allegations on the
other side..

A Dispute is a subject
of a Litigation;
When brought to
Court , it becomes a
SUIT (complaint)..

When a Suit is filed in


court, Jurors are called..
The Issues are then
joined together (claims &
Counter-claims..
and Witnesses are
examined.

I don't feel that an atmosphere of debate and total


disagreement and argument is such a bad thing. It
makes for a vital and alive field. Clifford Geertz..

In order to resolve
a Dispute, one can
either go to

Mediation

Arbitration

or Litigation.

So the big Q is - Litigate or Arbitrate ?


A simple question that can COST or SAVE you Millions..

Janus Lionus

Just what is
ARBITRATION ?
It is a form of
alternative dispute
resolution (ADR)..
It is a legal technique
for the resolution of
disputes outside the
courts.

in Arbitration
The parties (Claimant & Respondent) refer the
dispute to one or more persons (called
Arbitrator/s or Arbitral Tribunal);

A TRIBUNAL
.. A person or institution (ex; CIAC) with the
authority to judge, adjudicate on, or determine
claims or disputes.

A TRIBUNAL is a Trier of Fact (finder of fact)


.. A person, or group of persons, who
determines facts in a legal proceeding, usually a
trial. To determine a fact is to decide, from the
evidence, whether something existed or some
event occurred.

in ARBITRATION
The parties agree to be
bounded by the
Tribunals decision.

USUAL CLAIMS FILED IN CIAC:

CONTRACTORS CLAIMS:

CONTRACTORS CLAIMS:
Balance of Payment

CONTRACTORS CLAIMS:
Standby Cost of Equipment &
Labor

CONTRACTORS CLAIMS:
Variation Orders (Change
Orders and Extra Works)

CONTRACTORS CLAIMS:
Release of Retention

CONTRACTORS CLAIMS :
Delayed Payment of Billings

CONTRACTORS CLAIMS :
Time Extension

CONTRACTORS CLAIMS:
Price Adjustment:
(Increased cost of materials, fuel, wages)

CONTRACTORS CLAIMS:
Interest..

OWNERS CLAIMS:

OWNERS CLAIMS:
Over-payment of
Advances (for
materials, equipment,
and labor assistance)

OWNERS CLAIMS:
Liquidated Damages
(delayed schedule)

OWNERS CLAIMS:
Non-conformance to Specifications,,,

OWNERS CLAIMS:
Actual Damages ,,,

OWNERS CLAIMS (cont..):


Non-completion of Project

OWNERS CLAIMS (cont):


Negative Slippages
(delay in execution)

OWNERS CLAIM (cont):


Sub-standard Quality of Work

OWNERS CLAIM (cont):


Abandonment of Work

OWNERS CLAIM (cont):


Bond Guarantees

so, Why bring your Disputes to CIAC?


Discourage litigation.
Persuade your neighbors
to compromise
whenever you can.
As a peacemaker the
lawyer has superior
opportunity of being a
good man
Abraham Lincoln.

In order to better approach Construction


ARBITRATION, particularly its cost
implications, it is important to understand the
construction process;

The Construction Process,


CAUSAL CONNECTIONS,
and
ARBITRATION

Relations of Cause and Effect (C&E) play a central


role in many legal controversies, more so in
construction disputes.

Construction is a process-centered undertaking.. It


involves events that are caused by one preceding
it, and which in turn causes the one following it..
Hence, the use of the C&E method of analysis is of
great importance.

To be liable for lost opportunity due to delayed project


completion or payment due, damage to property, or
injury to workers and other persons, one must
(normally) have caused it.

To be liable for liquidated damages, the


Contractor must have acted in a way that had
caused the unnecessary delay in the delivery of
the project to the Owner.

In the same context, to be liable for delayed


payment, the Project Owner must have acted in a
way that caused the unnecessary delay in the
payment due the Contractor, thereby causing
financial damage to the latter.

In the arbitration of construction-related cases, both


causal laws (as in science), and particular causal
connections (as in history and forensics) are essential
and crucial in resolving disputes, especially if an
amicable settlement is to be arrived at by both
parties.

The following questions would give us an idea on how


the principle of C&E applies to construction
arbitration..
On the nature of scientific causal laws:
Was the collapse of the bridge due to:

a). Design deficiencies, such as incorrect


assumptions, incorrect analysis, errors in
computation, technical misinterpretations, etc

b). Use of sub-standard materials (concrete aggregates,


steel, );

c). Inappropriate construction methods/processes


(batching and mixing concrete; wrong placement of reinforcing
bars; improper handling of concrete mix during pouring);

d). Overloading of the structure well beyond its load


limit (say 20 metric tons).

ON THE NATURE OF CAUSAL CONNECTIONS:


Was the Contractors actions/inactions the cause of a
particular damage to the owners property, injury to
persons or delay in the projects completion ?

In resolving construction-related disputes,


different classification of cause can be
considered.
Classification I:
As Necessary Condition
and Sufficient Condition:

I.1) A Necessary Condition for the occurrence of an


event is the circumstance in whose absence the
event cannot occur.
Example: The present of Portland cement, aggregates and water is a
necessary condition for the normal production of Portland Cement Concrete
(PCC). Technically, no PCC can be produced without the three ingredients
being part of the process.

I.2) A Sufficient Condition for the occurrence of an


event is the circumstance in whose presence the
event must occur.
Example: The mere presence of Portland cement, aggregates and water
is not a sufficient condition for the normal production of Portland Cement
Concrete (PCC). They can be placed inside a drum, but if no mixing is
conducted, no PCC can be produced. The process of mixing is a sufficient
condition to produce the product.

Classification II:
As Remote Cause
and Proximate Cause:

Where there is causal sequence or chain of


events, A causing B, B causing C, C causing D,
and D causing E, we can regard E as effect of
any or all of the preceding events (causes).
The nearest among them, D is the proximate
cause of E, and the others are more and more
remote causes.

A >>>> B >>>

C >> D > E

Thus, in an arbitration case


involving the abandonment of
the Work as claimed by the
owner, the act of the contractor
suspending work activity may
have several causes.
If these events are in the form of
a causal chain, the relationship
of the final effect to the chain of
events is crucial in determining
fault/liability.

When a chain of causes leads to an event,


the elements in the chain of events closest
to the injury or damage (the proximate
causes) are most likely to be assigned legal
responsibility for the outcome.

Those whose actions are further back in the causal


chain (the remote causes), and who therefore could
not foresee the injurious result or damage, are less
likely to be held responsible for it.

A chain of events is a number of actions and their


effects that are contiguous and linked together

A chain reaction is a chain of events where one or


more events in the chain causes additional
reaction in an earlier stage of the chain, resulting
in a self-amplification of the chain of events.

One rule commonly


adopted is that
a defendant is liable for
injury to another only if
the harm suffered was
the natural and
probable consequence
of his act.

In cases of alleged negligence one may be


held responsible if, under the conditions
that normally prevail, the actor should have
been able to foresee that his act would be
critical in bringing the injury to pass.

The risk reasonably to be perceived defines


the duty to be obeyed.
Legal responsibility may be traced not only to
proximate acts in the causal chain, but also to
proximate omissions, or failures to act in
accord with ones legal duties.

Acts of omission, like acts of commission,


cannot escape responsibility for injury,
except when the immediate cause of the
damage, even if it was preventable, could
not reasonably have been anticipated.

Thus, the failure to foresee that an extraordinary


and unprecedented rainfall (such as Typhoon Ondoy
or Peping) might cause a flood, may not give rise to
legal liability for the damage at the end of an
unforeseeable causal chain.

Such omission can


therefore be a
basis for..
Legal Liability.

Determining
contractual
responsibility is
always a matter
of establishing
the facts and
fitting them to
established rules
of conduct.

In cases of alleged default of the Contractor


where no specifications were provided by the
Owner/A&E, the rule will commonly fix
responsibility based upon, building codes,
standard specifications (NBC, SC, Arch Code,
DPWH, ACI, ASTM, AASHTO, etc) and industry
practice

ADVANTAGES
of

Arbitration
over
Litigation:

1) Process time is relatively short;

2. Heard and decided by qualified legal &


technical professionals experienced in
construction;

3. Hearings are conducted in private and are


confidential;

4. Process is conducive to amicable settlement or


compromise agreement;

5. Restoration of pre-contractual business/personal


relationship is ripe.

So, WHO do you think would be better


equipped to resolve construction disputes?

A LONE JUDGE who may not be familiar with


the Construction Process?

or A TRIBUNAL composed of three


professionals, educated in law, or engineering,
or architecture or other allied disciplines;
experienced in construction and trained in
arbitration..

and who collaborate together to render a logical,


rational, fair and equitable decision on the case at hand ?

So, whenever you come to a Construction Dispute,


and wishes to settle your differences..
Think first. before you click

LITIGATE ?? or ARBITRATE ??

A simple Question that


can COST or SAVE you Millions..

THANK YOU
FOR YOUR ATTENTION
See you in Court?
Hopefully not

Engr. P. A. LEONCIO, Jr.


RCE, M.PICE, M.ASCE; RCA, M.PICAM

NOTICE:
For other Construction and Contract Management
seminars and CEO/COO lectures, please contact the
Construction Manpower and Development
Foundation (CMDF) c/o Ms. Jeanette Sanchez.
THANK YOU

Engr. P. A. LEONCIO, Jr.


Cell: 0922.869.3180
Email: paleoncio1726@yahoo.com