Construction disputes in small to medium enterprise’s in Ireland during recession. Identification of critical factors

• Author: David Treacy, Paul Tansey
• Position: School of Planning, Architecture and Civil Engineering, Queen’s University Belfast, Belfast, UK
• Pages: 21-41

Construction disputes in small to

medium enterprise’s in Ireland

during recession

Identication of critical factors

David Treacy and John P. Spillane

School of Planning, Architecture and Civil Engineering,

Queen’s University Belfast, Belfast, UK, and

Paul Tansey

Department of Civil Engineering and Construction,

Institute of Technology, Sligo, Ireland, and School of Planning,

Architecture and Civil Engineering, Queen’s University Belfast, Belfast, UK

Abstract

Purpose – This paper aims to identify the critical factors causing construction disputes in small to

medium enterprises (SMEs) in Ireland during the recent recession period from 2007 to 2013.

Design/methodology/approach – This study used a mixed-method approach incorporating a

literature review, case studies and questionnaire survey, with results analysed using exploratory (data

reduction) factor analysis.

Findings – The results indicate seven core critical factors which result in construction disputes in

SMEs in Ireland during a recession: payment and extras; physical work conditions; poor nancial/legal

practise; changes to the agreed scope of works; time overrun; defects; and requests for increase in speed

of project and long-term defects.

Research Limitations/implications – With Ireland emerging from the current economic recession

and the prevalence of SMEs in the construction sector, it is essential to document the core critical factors

of construction disputes which emerge within this particular segment of the built environment.

Practical Implications – To address the adversarial nature of the construction sector and the

prevalence of SMEs, it is essential to identify and document the critical factors of construction disputes

within this remit. It is envisaged that the results of this research will be acknowledged, and the

recommendations adopted, by construction SMEs, particularly within Ireland, as they emerge from the

economic recession.

Originality/value – This paper fulls a gap in knowledge with the emergence of the economic

recession and the identication of critical factors of construction dispute within SMEs in the Irish

construction industry.

Keywords Ireland, SME, Recession, Factor analysis, Construction disputes,

Small to medium enterprise

Paper type Research paper

Introduction

With the development and permeation of the global nancial crash in 2007 to economies

worldwide, Ireland suffered considerably and, in particular, its construction industry.

With limited government interaction to stem the disintegration of the sector within

The current issue and full text archive of this journal is available on Emerald Insight at:

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Construction

disputes

21

Received 30 October 2014

Revised 30 April 2015

Accepted 28 June 2015

InternationalJournal of Law in the

BuiltEnvironment

Vol.8 No. 1, 2016

pp.21-41

©Emerald Group Publishing Limited

1756-1450

DOI 10.1108/IJLBE-10-2014-0031

Ireland (Tansey and Spillane, 2014), small to medium enterprises (SMEs) deteriorated

and substantial job losses ensued (DKM, 2013). With this global crash and the implosion

of the Irish construction sector, signicant changes followed in the manner in which

construction stakeholders interact. With signicant restrictions in cash ow, reduced

credit facilities and limited opportunities for business, construction disputes increased.

With this changing demeanour in which the construction sector operates, there is a

necessity to review and consolidate information to identify the sources of construction

disputes in SMEs in Ireland. Spillane et al. (2011) highlight that the construction

industry in Ireland excels at dispute creation, while Tansey et al. (2014) argue that

Ireland’s construction sector has emerged negatively because of the recent economic

crash. In the context of the built environment, DKM (2013) highlights how SMEs

suffered the most and experienced signicant contraction, primarily due to their

dependence on the domestic market.

Previous research has been conducted on the Irish construction sector dispute

resolution mechanisms, but this was conducted prior to the economic downturn (Owens,

2008). Therefore, the distinctive nature and gap in knowledge that this paper fulls

assess this aspect of the Irish construction industry, but from the aspect of the recent

economic collapse. To this end, the aim of this paper is to identify the core critical factors

which result in construction disputes in SMEs in Ireland during the recession period

from 2007 to 2013. This covers both disputes between SMEs and also SMEs and their

larger counterparts. In achieving this aim, a mixed-method approach is introduced,

including a review of the effect of the economic recession on the construction sector. It is

envisaged, with the continued affection of the Irish construction sector to engage in

dispute, construction management professionals can adopt the ndings herein to aid in

the identication of critical factors of dispute in SMEs in Ireland, particularly during a

recession. Furthermore, with the continued rising cost of dispute resolution within the

built environment (Jannadia et al., 2000;Mohamed et al., 2014) and the proliferation of

disputes among parties (Murphy et al., 2014), it is essential that the industry reviews the

period of economic turmoil, in order to be better placed, when such uncertainties return

to the market. This is substantiated where Jones and Evans (2013) highlight the cyclical

nature of the UK economy and the need to encourage recovery, growth and most

importantly, develop on the failings of the past. To assist in this process and to provide

an insight into the literature on the subject, an introduction into the core published

works in this area is undertaken.

The effect of the economic recession on the construction sector and its

disputes

The global economic recession which began in the USA, was caused by an interest rate

increase in July 2007 (Knopp, 2010). On Monday, 15 September 2008, one of the largest

investment banks in the world at the time, Lehman Brothers, collapsed and led for

bankruptcy (Swedberg, 2010), signalling the acute stage of the crisis. This economic

failure sent shockwaves around the world and triggered the largest world recession

since the Great Depression of the 1930s. According to Cummins (2011, p. 9), this global

recession was triggered in the USA, mainly in the housing and property market, “[…] by

low interest rates, lenient regulation and the easy availability of credit […]” gross

domestic product, which is a reliable measure of economic status, is widely used as an

indicator of entry to, and exit from, recession (Knopp, 2010). During the economic

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