Analysis Of Construction Contract Dispute Resolution Based On Transaction Cost

There is a huge amount of investment of the project in our country, and each year the growth rate was faster. About construction projects in China, the investment of billions or even tens of billions more items can be said to abound. Construction project itself has a large amount of investment, long construction period as well as highly technical, complex and integrated, and other characteristics, so that the project there are many uncertain factors, about a huge amount of investment in these projects, due to its engineering much greater scale, more complex, larger amount of investment, while the owners of the contract may change plans in implementation process, so the dispute produced during the works is an inevitable thing, the cost for the settlement of disputes are bound to relatively large. China is still mainly uses traditional methods such as arbitration and litigation to resolve disputes, arbitration and litigation as a time longer than generally take at least ten months, sometimes in years after the completion of the project, the dispute has still not been resolved, arbitration and litigation not only decreases the efficiency of high transaction costs of resolving disputes, but also has a serious impact on the progress of the project.Both at home and abroad the project contract dispute resolution methods were studied, and some new dispute resolution methods were applied, such as DRB (Dispute Settlement Committee) and DAB (Dispute Adjudication Board), etc., there are early research about the construction contract dispute resolution in foreign country than domestic country, new dispute resolution are proposed and applied mainly by the United States and the World Bank, the United States first proposed the DRB and apply it to the U.S. projects, through practical use, DRB show their significant savings on the cost of construction project. With the international expansion in DRB and DAB range of applications, foreign scholars started in-depth study of these new means of dispute settlement, a qualitative and quantitative point of view of dispute resolution are analyzed. Qualitative analysis includes the causes of the dispute, the merits of various dispute resolution analyses and so on. Quantitative analysis is generated through the collection of cost data from construction project disputes, including quantitative analysis of various dispute resolution costs incurred in order to compare their advantages and disadvantages. Since the data is difficult to collect, reliability of the quantitative analysis of the results is not strong. But it provides a quantitative analysis of the future thinking for us. Domestic dispute settlement analysis stay on primary stage of imitation of foreign studies, including studying a variety of advantages and disadvantages of dispute resolution from a qualitative point of view, promotion of new dispute settlement in the construction project.Because there are fewer domestic point of view of construction dispute resolution from transaction costs, this selection from the perspective of transaction costs were analyzed and discussed, combined with China’s current situation of construction dispute resolution, this paper proposes some suggestions to improve the utility of mechanism. First, this paper refers to transaction cost theory to analyze the cost of construction contract dispute. The analysis reveals that the transaction costs of construction contract disputes include external transaction costs, internal transaction costs and hidden transaction costs. Second, the paper does comparative analysis of litigation, arbitration, DAB and DRB in transaction costs on the advantages and disadvantages, including the main comparative analysis of costs of arbitration and DRB. The reason to choose arbitration is that it is representative of traditional dispute resolution, which resolves disputes in less transaction costs with higher efficiency and wide range of applications in the traditional dispute resolution methods. The reason to select DRB is that it is generated earlier than DAB and DAB is the development of DRB having little difference with DRB. So the paper majorly compares the transaction costs of arbitration and DRB. Compared to arbitration, DRB has several major advantages:First, professional quality of staff to resolve disputes has improved a lot, DRB members are generally construction industry experts with a wealth of experience and legal expertise. The arbitrator generally has some legal professional qualities. Second, the DRB members participate in the project with the project setting up, so DRB members can better understand the progress of works and everything else progressing in the project for quick settlement of disputes and prevent the occurrence of the dispute. From this perspective, DRB has a role in prevention of disputes arising with the settlement of disputes in advance. The arbitrator in the settlement of dispute only began to intervene in the dispute after the two sides submitted disputes in advance, so their familiarity with the project and the dispute is far less than DRB members, their efficiency of resolving disputes certainly not as DRB too. Arbitration is an ex post mechanism to resolve disputes. In this paper, with comparative analysis of, the paper analyzes the evolution of processes and trends of from the perspective of transaction cost. So this paper analyzes construction dispute resolution in the order of supervising engineer, litigation, arbitration, DRB and DAB. By analyzing the trend:the results is that with the evolution of the dispute resolution process, the independence of the dispute resolution is strengthening, the professional quality of the staff participating in the project dispute is increasing.The time when is more and more earlier, resulting in an increase in the efficiency of dispute resolution.After analyzing the advantages and disadvantages of various dispute resolution, this article uses the Yellow River Diversion Project to analyze the transaction costs of arbitration and DRB, in this case, as the project produced a total of34claims dispute, the parties first used DRB to resolve, ultimately addressed only18, and the remaining16using arbitration, in the arbitration process, the owners spent$4million attorneys’ fees that is external transaction costs, which lasted ten months, the dispute is not resolved, then the parties again consulted on the basis of DRB recommendations. Within two months the dispute is finally resolved. If the parties insisted on the use of arbitration, then the dispute would go on to spend at least$6million attorneys’fees, but the two sides finally agreed on$30million, the costs of arbitration has reached one-third of the amount claimed. In contrast, the parties to the contract only solved the dispute on the basis of the DRB recommendations through friendly consultations.Finally, combined with our construction contract dispute settlement situation, put forward the proposals of contractual dispute settlement mechanism including the complete of the pool of construction experts, to make clear that the rights and obligations of the assessment team members and to emphasize the amicable settlement The significance of this analysis of a variety of dispute settlement through transaction cost is to improve our construction contract dispute resolution mechanisms to reduce the time and cost of dispute settlement enhancing our efficiency of dispute settlement.