Construction Arbitration and ADR

On-Site Dispute Management Services

Ideally, the use of the techniques and processes described below for handling disputes on-site is established in the early stages of a project.

Assisted Negotiations

Typically, parties may engage in direct party-to-party settlement efforts involving only those who are involved in the dispute. However, where difficulties arise, parties may desire facilitated negotiations in which a neutral helps the parties structure their own negotiation. This process may involve third parties, such as experts or other industry personnel familiar with certain products or techniques, or a mediator or facilitator may participate in an informal manner to assist in direct party-to-party discussions.

Traditional Partnering

Partnering is a commitment by all stakeholders to achieve goals and objectives agreed upon prior to a project’s commencement . In its usual format, representatives of the project’s stakeholders attend pre-construction workshops in order to get to know each other and share concerns. Neutral facilitators guide discussions about the project, specific individual goals and agendas. It is during these meetings that participants develop ways to recognize risks that may create obstacles to the success of the project. They develop methods to avoid, control or cope with potential sources of conflict. The eventual outcome is a joint agreement signed by the workshop participants that sets forth their goals and expresses their commitment to the project.

Partnering has been formally endorsed by the major professional groups within the construction industry, as well as by federal and state government organizations and agencies. To be successful, partnering workshops must involve a skilled, experienced partnering facilitator who will take into account the unique aspects of a given project, matching specific procedures and techniques to the parties and the project .

The Standing Neutral Concept: DRBs, Single Dispute Resolvers and On-Site Neutrals

In addition to, and as part of its specially designed Partnering program, there are an array of complementary services that respond to the need for timely action in dispute avoidance and management. Among them are on-site or on-call neutrals, single dispute resolvers and Dispute Resolution Boards, all of which are described below.

Dispute Resolution Boards

Previously called Dispute Review Boards, Dispute Resolution Boards (DRBs) are typically a panel of three neutrals appointed by the parties that become part of the project team. They attend periodic meetings, review essential project documents and assist in the identification and resolution of issues and potential problems. Dispute Resolution Boards are usually, but not always, established in the contract documents. A dispute is presented to a Dispute Resolution Board at a hearing, and the Dispute Resolution Boards determination is generally presented as a recommendation or a non-binding decision. Although the recommendations are non-binding, they are generally admissible in future proceedings—such as arbitration or litigation—if the issue is not resolved at the Dispute Resolution Board level.

Since the inception of Dispute Resolution Boards in the early 1970s, they have become widely used in a variety of construction projects. Initially utilized in the construction of tunnels, mass transit systems, power plants and other large civil engineering projects, more recently their use in commercial and industrial construction has expanded. By September 2003, (in the United States) more than 1,000 projects had impaneled Dispute Resolution Boards, which settled 1,200 disputes with less than 30 disputes proceeding to litigation. (Source: Dispute Resolution Board Foundation (DRBF) Tabulation of Dispute Resolution Boards, September 2003) .

Single Dispute Resolver

In smaller and less complex projects, the parties will specify a Single Dispute Resolver to avoid the expense of a three-person Dispute Resolution Board. Chosen jointly by the parties, the Single Dispute Resolver performs all of the functions of a traditional Dispute Resolution Board.

On-Site Neutrals

Parties may also choose to appoint an On-Site Neutral, who acts as a mediator to assist in the resolution of problems at the job site before opposing positions have had time to harden. This individual is usually hired at the commencement of a project, has detailed knowledge of the project’s plans and specifications, is familiar with all of the stakeholders and is kept abreast of the progress of the job. The On-Site Neutral acts as a mediator to help parties resolve issues or assists in identifying ways in which parties may deal with difficult on-site problems, risk assignment and risk management. Typically, an On-Site Neutral is more involved in the project on a day-to-day basis than a Single Dispute Resolver and usually acts more as a mediator or a facilitator than someone who would render a formal recommendation.

Dispute Resolution Services

Even parties who work well together and have implemented ADR tools in the early stages of the project may have disputes that cannot be resolved during the course of the project . There are a broad range of options for avoiding the delay and expense of formal litigation to resolve post-completion issues:

Mediation

One or more mediators may assist parties in settling a controversy or claim by facilitating negotiations. The mediator participates impartially in the negotiations, guiding and consulting the parties involved.

The goal of mediation is an agreement that all parties find mutually acceptable. The mediator does not impose a settlement but rather guides the parties towards achieving their own resolution of the dispute. Mediation is often an antecedent to arbitration or litigation, and it may be court mandated.

As an informal and voluntary process, mediation gives the parties direct control over the course of a dispute’s resolution and leads them toward the structuring of a final settlement. Settling disputes through mediation generally saves time and money and, perhaps most importantly, it enables those involved to preserve valuable business relationships .

Fact-Finding

Fact-Finding involves an impartial third-party investigation that results in findings with or without a recommended settlement. This process is most effective when there is a need to establish the factual situation associated with a dispute. It may involve, for example, determining the value of a product or service. In the Fact-Finding process, an experienced, independent neutral, chosen by the parties, makes a determination as to fact, value or perhaps the source or cause of an error. The neutral then issues a report that sometimes includes a recommended resolution. This report or recommendation is then used in an attempt to reach a settlement.

For example, parties may have the framework of a settlement worked out but do not have the ability to place a value on the product or services rendered . In this case, an expert is engaged to establish that value.

Parties who choose to employ a neutral Fact-Finder must agree upon the individual appointed, outline the parameters of the neutral’s role and the issues to be investigated, and decide how the report will be utilized.

Early Neutral Evaluation

In the early stages of a dispute, an impartial third party hears presentations by both sides and provides an evaluation of how the case might turn out if taken to court. One might use Early Neutral Evaluation to help determine the strength of one’s position in a dispute or to help persuade or educate parties in the viability of moving forward with arbitration or litigation.

Advisory Opinions

An impartial third-party neutral is engaged to give parties an opinion as to the possible outcome of a dispute. This process is similar to, but less formal than, arbitration where an arbitrator’s decision is non-binding and used more as a tool for settlement negotiations .

Mini-Trials

Lawyers from both sides make summary presentations of their “best-case” scenarios to a panel of three people: a manager from each of the two disputants with settlement authority and a neutral. After the presentations, if the two managers cannot agree on a solution to the dispute, the neutral, acting as a mediator, assists the parties in seeking a resolution .

Arbitration

In arbitration, a dispute is submitted to an impartial third party or panel for a decision that is generally binding on all parties involved, although parties may opt for advisory or non-binding arbitration. Arbitration is a less formal alternative to litigation and an efficient means of resolving disputes. It can be faster and less expensive than judicial resolution, and it has the added advantage of presenting disputes to industry experts. Also, arbitration is private and not subject to public disclosure, as is most litigation .

Typically, arbitration clauses are written into contracts before the commencement of a project, enabling parties, if they so choose, to draft precise language that will address special needs of a project.

Note: the above text is based mainly on an American Arbitration Association guide.