Strategic Negotiation in Construction Disputes: Overcoming Power Imbalances and Enhancing Resolution Through Structured Approaches

Omar K. Sabri ^*

• Department of Civil and Environmental Engineering, Faculty of Engineering, Norwegian University of Science and Technology, Trondheim, Norway

Negotiation is a built-in and essential process in the construction sector, taking a central function in resolving conflict, administration of contracts, and completion of projects (Yates, 2011). Due to the nature of construction projects where various stakeholders, contractual terms, and unexpected occurrences converge disputes are inevitable. Negotiation is an important tool for resolving conflict, avoiding costly litigation, and maintaining professional relationships among owners, contractors, and subcontractors (Ren et al., 2010;Yousefi et al., 2010b). Despite its importance, negotiation in the construction industry remains under researched, particularly when addressing power imbalance and integrating systematic, psychology-based approaches to achieve best outcomes.The importance of negotiation goes beyond the resolution of conflicts; it has a direct influence on project success, financial viability, and sustainable industry cooperation (Marzouk and Moamen, 2009). Good negotiation skills can avoid project delays, reduce financial loss, and facilitate smoother project termination (Charoenngam and Mahavarakorn, 2010). The result of negotiations is not entirely a technical or contractual function. Power relations, behavioral style, and strategic thinking play a fundamental role in the success or failure of negotiation (Spiess et al., 2008;Lu et al., 2014). For instance, differences in power among actors generally determine whether or not negotiations lead to cooperation or conflict. Additionally, cognitive biases such as reactive devaluation and anchoring effects significantly affect the manner in which construction professionals receive and respond to offers in negotiations (Lewicki et al., 2010).While the significance of negotiation is recognized, there is not much systematic, formalized technique to aid construction professionals in obtaining best outcomes (Cheung et al., 2009). These conventional methods are typically contract and legal right-oriented, not considering the psychological and strategic facets that would lead to improved solutions (Nyhart and Samarasan, 1989;Ren et al., 2010). It reflects the need for a structured, psychology-oriented methodology in construction negotiations. By incorporating behavioral theories, power-leveling tactics, and negotiation strategy frameworks into a single setting, participants have the potential to generate more balanced, more efficient, and more sustainable outcomes.The leverage and dependence theory also explains power distribution in negotiations (Lewicki et al., 2010). A party with alternative options or fewer restrictions enjoys more bargaining power, whereas a highly dependent party with few alternatives is forced to compromise (Alavoine, 2014). Highly dependent contractors in construction disputes might find it difficult to negotiate fair settlements because they stand to lose long-term client relationships if they hold out on refusing unfair terms. Successful negotiators are aware of such influence imbalances and use tactics to balance influence by highlighting mutual benefits, making innovative offers, and tactically extending their offers (Sander and Rubin, 1988;Kim et al., 2005).Apart from power relations, cognitive and psychological biases also significantly influence construction negotiations (Lu et al., 2014). One such bias is reactive devaluation, where negotiators naturally distrust offers from the other party as being biased or self-serving. This leads to missed opportunities for settlement and prolongation of disputes unnecessarily (Cheung et al., 2020). For example, contractors may decline settlement offers in claim negotiations simply because they are from the opposing project owner regardless of the terms being fair (Ren et al., 2002).Yet another significant psychological factor is personality trait influence in terms of negotiating style. For example, per Big Five Personality Model studies, negotiations that are more cooperative will originate from a high agreeableness and high emotional stability individual, and from lower neuroticism and lower dominance individuals (Yiu and Lee, 2010). Such a person is likely to make adjustments if the other expects it. Faith in one's competence (competence trust) is more positively influential on negotiation behaviors than faith in good intentions (goodwill trust), particularly in construction subcontracting. Managers ought to concentrate on establishing trust with their partners to settle conflicts more efficiently (Zhang et al., 2016).Risk perception and attitude also influence construction negotiation decision-making (Cheung et al., 2006). Risk-tolerant individuals tend to be more likely to escalate disputes or make forceful claims, whereas risk-averse individuals will opt for quick settlements to reduce uncertainty (Lu et al., 2014). Misestimation of an opponent's risk tolerance can lead to unjustified escalations or second-best deals.Negotiators in construction disputes tend to take a cooperative or adversarial negotiation approach (Gould, 2012). Cooperative negotiation, or principled or interest-based negotiation, attempts to deliver win-win results through an approach of mutual interest and not positional bargains (Ren et al., 2010). This approach generates trust, inspires creative problem-solving, and has a tendency to yield solutions acceptable to all parties. Conversely, adversarial negotiation is grounded in positional bargaining in which a party aggressively promotes its own interests with minimal room for compromise (Pérez-Yus et al., 2020). While adversarial methods may work for short-term conflicts, they undermine long-term relations and risk more in going to court. The construction sector should embrace ongoing problemsolving practices, best practices, and inventive contracting strategies to minimize conflicts, increase collaboration, and construct a sustainable future (Sabri & Torp, 2022).An increasing amount of research emphasizes the importance of emotional intelligence and mindfulness in enhancing negotiation effectiveness (Kalikow and Monson, 2023). Mindful negotiators can manage stress better, regulate emotional responses, and stay focused on long-term goals. Emotional intelligence enables negotiators to identify and respond to their counterparts' emotions, resulting in more effective dialogue and fewer escalations (Katz and Sosa, 2015;Kelly and Kaminskienė, 2016).In construction conflicts, a hybrid strategy-integrating collaborative values with strategic assertiveness-tends to produce the most effective outcomes (Ren et al., 2010;Yousefi et al., 2010c). This includes listening actively to counterpart interests, finding areas of commonality, and employing data-based arguments to build stronger negotiation positions. Through the balancing of power differentials, mitigating cognitive errors, and utilizing sound negotiation skills, construction practitioners are able to significantly improve processes of conflict resolution (Cheung et al., 2006).Table 1 summarizes the main construction negotiation challenges and related strategies that can be employed to optimize negotiation performance. These results are the foundation of the next section, where systematic negotiation practices and recent advances in conflict resolution are addressed. Negotiation in the construction industry demands a wise mix of technique which considers the technical and behavior drivers (Sabri et al., 2024). Contractual negotiations are formal and are directed more towards legal rights and financial rewards, yet studies indicate a more active and psychologically driven process is more successful (Kilgour and Eden, 2010;Lu et al., 2014). This part of the chapter addresses some of the key strategies, including the integration of different negotiation approaches, the employment of artificial intelligence (AI) in conflict, and the acquisition of cooperative tendencies through alternative dispute resolution (ADR) mechanisms.Meditators are found to be more effective in negotiations than non-meditators who share the same sociodemographic characteristics. The benefit is specifically evident in the aspects of upholding power balance and creating a positive climate, although meditation has been found to improve negotiation effectiveness in all facets (Pérez-Yus et al., 2020).Disputes in construction occur most often as a result of disparate interpretations of contracts, unexpected delays in projects, and financial differences (Yousefi et al., 2010b). Principled negotiation, which has been introduced by Fisher and Ury, is based on interest-based bargaining where participants aim at underlying concerns instead of fixed positions (Fisher et al., 1987). This contrasts with rightsbased negotiation, which is founded on contractual obligations, law, and precedent (Schock, 2013). A blended approach-understanding both principles-allows negotiators to resolve disputes while preserving business relationships (Kilgour and Eden, 2010).For example, in the scenario of a contractor claiming additional payment as a result of delayed projects, a rights approach would focus on strictly contractual terms and responsibility (Ren et al., 2010). An interests-based approach would more likely ask questions about the larger context, e.g., supply chain breakdown or unemployment of employees, in an attempt to discover a mutually acceptable solution (Lewicki et al., 2010). With the incorporation of these viewpoints, construction negotiators can prevent stalemate and develop long-term cooperation.Second, strategic concessions are also pivotal in conflict resolution (Gould, 2012). Experiments indicate that concession-givers who make timely, moderate concessions are seen as more cooperative and thereby more likely to elicit reciprocal flexibility on the part of the other side (Kilgour and Eden, 2010). But concessions should be strategically couched so they are not read as signs of weakness or precedent-setting (Brett, 2000). Construction negotiators must employ anchoring strategiesbeginning with a strong but fair position-to shape settlement talks in their direction (Levin, 1998;Lu et al., 2014).Information Technology offers multiple levels of interaction, speed, and richness of communication, and multiple platforms where parties can communicate. These are text-based, voice calls, and live video conferencing, where the disputing parties are able to see one another and, if necessary, include an arbitrator or mediator to assist in resolving the issue (Zeleznikow, 2021). As construction becomes more complex, artificial intelligence-based negotiation support systems and internet-based systems are transforming dispute settlement (Zeleznikow, 2021). Multi-agent negotiation systems (MANS), for instance, use algorithms to analyze contract data, foresee likely conflicts, and offer the best advice on negotiation as experience of case histories (Ren et al., 2002). Decision-making is supported through real-time access to bargaining capability, risk conditions, and possible settlement avenues (Bala et al., 2013).Furthermore, decision-support methods-e.g., AI-based mediation platforms-enable parties to assess alternative negotiation contexts prior to initiating formal negotiations (Zeleznikow, 2021). For example, predictive analytics are capable of quantifying the financial effect of delayed conflicts, thereby channeling stakeholders towards cost-effective resolution (Barnett and Treleaven, 2017).Neutral communication platforms powered by AI negotiation tools can further abate emotional tensions and favor fact-based discourses over contentious arguments (Barnett and Treleaven, 2017;Zeleznikow, 2021).Yet, the effectiveness of AI in negotiation is reliant on data precision and user embracement. Construction professionals need to ensure that AI technology is utilized as a supplement, and not as a substitute, for human negotiation ability (Raslan and Nassar, 2024). AI is capable of presenting datadriven facts that are informative, yet effective negotiation needs emotional intelligence, strategic thinking, and relational skills (Chaphalkar et al., 2015).While positional bargaining is widely applied in conventional negotiation strategies, collaborative negotiation behaviors are increasingly being viewed as a solution to long-term disputes in construction projects (Cheung, 2014). Studies show that mediation, early intervention, and formal communication minimize adversarial positions significantly, leading to faster and less expensive settlements (Zaytseva, 2023;Demagistris et al., 2022). Ideas from agent-based negotiation can be used in collaborative, computer-supported negotiation. Utility and cost functions, which measure how satisfied an agent is as it works toward a goal, can also be applied to measure how satisfied a human negotiator feels during the collaborative process. This helps evaluate progress and outcomes in a structured way, fostering better teamwork and mutual understanding (Peña-Mora & Wang, 1998).Mediation is the most effective ADR method applied in construction dispute resolution (Sabri et al., 2024). Unlike arbitration or litigation, in which binding judgments are enforced, mediation allows parties to retain control over the outcome while having the benefit of a neutral facilitator (van Oerle, 2022). Research confirms that mediation saves litigation cost, preserves business relationships, and increases the settlement rate in construction disputes (Gould, 2012;Jaeger and Ho k, 2010). By facilitating open communication, mediators help parties to reframe disputes from adversarial arguments to problem-solving discussions.Environmental and cultural factors also shape negotiation styles in construction projects. Negotiation styles, for instance, vary geographically. Direct and legalistic styles are preferred in Western countries, while relationship-oriented and consensus-oriented negotiations are most critical in the majority of Asian and Middle Eastern construction markets (Yousefi et al., 2010c). The awareness of such cultural differences enables negotiators to modify their communication styles and bargaining strategies. Projects tend to work in multicultural and multidisciplinary settings, where managers have to balance the interests of different stakeholders with different views and resolve conflicts from multiple sources. Project managers frequently prioritize confrontation and compromise as their initial strategies, highlighting the significance of responsibility and accountability in managing conflicts effectively within a team (Tsao et al., 2021). DiscussionNegotiation in construction has also evolved immensely, from inflexible contractual adversarialism to more interactive, formal, and psychology-based approaches (Yates, 2011). Traditional construction negotiations were characterized by positional bargaining, with both parties negotiating their respective best interests, with the outcome primarily being lengthy disputes and expensive litigation (Vaux and Dority, 2020). Yet current research suggests adaptive negotiation strategies involving the combination of behavioral rules, AI-facilitated tools, and interest-based theories of negotiation are more effective in outcome (Dinnar et al., 2021;Kwon et al., 2021).One of the significant shifts in today's construction negotiation is an appreciation that psychological and power factors play a significant role in building agreements (Zhu and Cheung, 2020). Instead of being centered on legal stipulations and contractual entitlements, negotiators increasingly focus on cognitive biases, personality, and strategic concessions when framing their strategies (Schaerer et al., 2019). In addition, adopting systematic strategies, such as principled negotiation and collaborative problem-solving, has led to improved practices of resolving conflicts (De Janasz et al., 2023).The emergence of artificial intelligence (AI) and digital platforms is revolutionizing construction negotiation through data-driven insights, predictive analytics, and automated mediation technologies (Zeleznikow, 2021). AI-driven multi-agent negotiation systems allow stakeholders to examine contract risks, project dispute costs, and model probable outcomes prior to engaging in negotiations (Barnett and Treleaven, 2017;Palha, 2018). Such technologies not only minimize uncertainty but also maximize objectivity, making negotiations less susceptible to emotional bias and reactive decision-making.Also, smart contracts based on blockchain are being studied as a means of automating enforcement of agreement, limiting the necessity for protracted negotiations regarding payment claims and project stages (Sigalov et al., 2021;Michaelson and Jeskie, 2021). The technologies will most probably play a significant role in simplifying construction negotiation procedures without compromising transparency and accountability.The challenge lies in the fact that human beings are not always rational and often change their strategies unpredictably. Additionally, their decision-making processes are far more complex and nuanced, making it difficult to accurately model their behavior in AI systems (Peña-Mora & Wang, 1998).AI faces pragmatic challenges in drafting agreements, such as precision, preventing prejudice, and understanding nuanced legal connotations. Parties may also distrust AI-powered tools and worry about data protection and privacy. Additionally, AI is unable to replicate human judgment and adaptability in dynamic dispute resolution scenarios (Zeleznikow, 2021).Negotiation is still a human activity that needs effective people skills, emotional intelligence, and strategic thinking despite technological developments (Raslan and Nassar, 2024). Therefore, behavioral training among construction professionals becomes more highlighted to equip them with negotiation skills that resonate with psychological and cognitive principles (Lin and Cheung, 2022).For instance, mindfulness training and emotional intelligence courses are being integrated into negotiation learning, assisting professionals in stress management, emotional regulation, and building trust with counterparties (Cheung, 2021;Kalikow and Monson, 2023). Also, role-playing simulations and negotiation analytics enable stakeholders to rehearse negotiation situations under a controlled setting, enhancing their skill in conducting high-stakes disputes confidently (Irrera, 2020).Construction projects are increasingly globalized and interdisciplinary, and negotiators must evolve their approaches to accommodate various cultural, legal, and economic contexts (Gökmen, 2019). Future negotiation practices will probably focus on flexibility, stakeholder alignment, and proactive risk management (Dinnar et al., 2021).• Hybrid negotiating models using interest-based bargaining and AI analytics will be the standard (Barnett and Treleaven, 2017).• Multicultural projects will require cultural flexibility, as styles of negotiation differ substantially (Cheung, 2021).• Real-time contract monitoring and negotiation audits, which will detect potential differences prior to dispute escalation (HKA, 2020), are early-stage conflict prevention devices.With adaptive negotiation approaches, construction experts are able to attain less friction during project execution, decreased cost of conflicts, and industry long-term viability (Sabri et al., 2022).While negotiated settlement has shown worth, widespread industrial application is short due to timeworn perspectives, resistance to change, and a lack of formal negotiation schooling (Movius, 2008). Significant portions of the construction industry continue to prioritize judicial combat over joint problem-solving with the resultant ongoing conflict, monetary waste, and sullied business relationships (Vaux and Dority, 2020).To utilize the strength of systematic negotiation methods properly, business stakeholders, policymakers, and learning institutions must enable learning, training, and technology uptake as follows:1. Institutionalizing Negotiation Training -Building management programs should incorporate negotiation psychology, strategic bargaining, and conflict resolution skills into the curriculum (Thompson, 2019).Promoting ADR Utilization -The government agencies and industry associations should promote mediation, arbitration, and early resolution procedures as alternatives to litigation (Fenn and Gameson, 2003).Adopt AI and Digital Solutions -Firms have to invest in artificial intelligence-powered negotiating tools and contract reviews through analyzed data in order to optimize decisionmaking (Raslan and Nassar, 2024).Standardizing Best Practices -Industry-wide frameworks and guidelines should be established to facilitate the consistent use of negotiation methods in projects ( (Kilgour and Eden, 2010).Through the establishment of a culture of systematic, psychology-based negotiation, the construction sector can reduce tension, increase project success, and create a more sustainable environment for dispute resolution.This study finds significant gaps and potential areas in construction negotiation, demanding practical suggestions and future studies. To address power imbalances, the establishment of standard contractual terms and balanced payment mechanisms needs to be adopted to create a more equitable platform for large contractors and subcontractors. Future studies need to examine the effect of contractual reforms and strategic alliances on enhancing the bargaining power of small companies. Besides, integrating behavioral knowledge in negotiation training such as emotional intelligence and bias reduction will improve decision-making. Longitudinal studies need to establish the long-term impact of such training on negotiation outcomes.The use of AI and cyber resources, such as predictive analytics and multi-agent negotiation tools, can potentially enhance decision-making without maximizing emotional biases. However, their impacts and ethical implications must be studied further to establish whether or not they can be used successfully in real-life negotiation scenarios. Promoting models of cooperative bargaining, such as interest-based bargaining, can encourage win-win outcomes and maintain the relationship.Experiments to compare the effectiveness of cooperative and competitive models should investigate their utility for various types of dispute scenarios.Expansion of the application of Alternative Dispute Resolution (ADR) and, in particular, mediation can potentially increase efficiency and cost savings in the resolution of disputes. The future of research should consider examining the success rates of ADR across varying scenarios and investigating how cultural differences impact its efficacy. With the importance of cultural competence in international projects, research also needs to explore the effects of cultural flexibility on negotiation approaches and results. For large, interdisciplinary projects, creating adaptive approaches that integrate interest-based bargaining with data-driven analysis is advised. Studies should examine the real-world applicability of these hybrid approaches. Standardized negotiation training and methodologies can institutionalize industry best practices and overcome change resistance. Future research would determine impediments to adoption and propose means of fostering a collaborative culture. Block chain and smart contract use can also automate contract enforcement and simplify payment processing. Research would test the feasibility and impact of these technologies on construction negotiations. Lastly, an all-encompassing research agenda is important to cater to future trends, such as AI integration, globalization, and hybrid models of negotiation, to make the construction sector robust and innovative.This research demonstrates the dynamic dynamics of construction bargaining with its complex interplay between power forces, cognitive events, and formal procedures of bargaining. Conventional contract-based bargaining can yield only adversarial results and costly litigation but newer approaches like interest-based bargaining and behavioral negotiation strategies introduce cooperation and sustainable conflict resolution. By recognizing cognitive biases, personality traits, and power imbalances, bargainers can create more successful and enduring agreements without compromising professional relationships.One of the main contributions of this research is the synthesis of strategic, rights-based, and powerbalancing negotiation approaches to achieve fair and effective results. Interest-based negotiation promotes collaborative problem solving, while rights-based negotiation sets legal and contractual boundaries. At the same time, managing power imbalances prevents coercion, promoting fair negotiations even in unbalanced situations. This model provides useful insights on preventing conflict escalation and improving long-term project outcomes.The research results are relevant to future construction dispute resolution since digital technologies, artificial intelligence, and behavioral science converge to transform the practice. AI decision-making, predictive analytics, and multi-agent negotiation systems offer objective data-driven options for improving negotiation performance. Emotional intelligence, mindfulness, and cross-cultural resilience will also become essential skills to learn to improve negotiation and reduce disputes. While this research is a useful addition, it also comes with challenges of applying the same in real life, including resistance to change from the industry, divergence of legal schemes, and the need for extensive training in systematic negotiation methods. To effectively adopt the likes of such strategies, the construction industry will have to put a premium on education, invest in new-generation negotiation tools, and embrace collaborative methods of dispute resolution. By doing so, the industry can substantially reduce conflict levels, improve project success, and build a more efficient and robust negotiation culture.