The Roles of Negotiation in Construction

Negotiation is a form of the decision-making process where two or more parties jointly search a space of possible solutions with the goal of reaching a consensus.

In the construction industry, collaboration is an essential key for the success of projects. Since different participants from different organizations try to work together in projects, competitive stresses exist in their relationships and as a result, disputes or conflicts may inevitably occur; negotiation is preferred by project participants for the settlement of claims. Negotiation plays an important role in resolving claims, preventing disputes, and keeping a harmonious relationship between project participants. However, claims negotiations are commonly inefficient due to the diversity of intellectual background, many variables involved, complex interactions, and inadequate negotiation knowledge of project participants. Most project managers consider negotiation as the most time- and energy-consuming activity in claims management.

 

Negotiation theories and principles

To address the complex technical and human issues in negotiation, several important negotiation theories and principles have been developed, which mainly include game theory, economic theory, behavior theory, and negotiation theory.

Game theory seeks to get at the essentials of decision making and the associated strategies in situations where two or more parties are interdependent, and where, therefore, the outcome of their conflict and competition must be the product of their joint requirements and the interaction of their separate choices.

Classical game theory approaches are essentially static models in which it is assumed that each player decides in advance before the game actually starts, what move he/she will make to maximize his/her own gain in any possible situation that may arise.

Economic theory seeks to develop dynamic models of process, involving offers and counteroffers and interdependent concession making. In contrast to the classical game theory, there is no concern for the discovery of once-and-for-all strategies, but rather an intention to examine how the bargainers should interact in terms of their expectations of each other. Economic models analyze the processes through which the demands of the participants converge over time toward some specific point on the contract curve.

Behavior theory focuses on the complex human factors of negotiation. It attempts to analyze the negotiation processes in which negotiators influence each other's expectations, perceptions, assessments, and decisions during the search for an outcome, thereby affecting the outcome. Much attention is given to the nature of changing expectations and negotiators' tactics, and to the significance of uncertainties of information, perception, and evaluation-all matters that tend to be ignored by game theory and economic theory. The learning model is an important behavior model that views negotiation as a learning process.

Negotiation strategies are contingent and contain errors, and expectations will change; this will lead in turn to a modification of each party's choice of strategy. What has occurred previously is used as a standard of assessment by which to choose what to aim for and what to do next.

Negotiation theory represents the qualitative aspect of negotiations. Negotiation theory is the study of the exchanges between parties designed to reconcile their differences and produce a settlement. Negotiation theory aims to assist during the negotiation process so that the qualitative characteristics of a negotiation are taken into consideration.

 

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