Dispute Resolution Methods

Annual Program of the

Claims Avoidance and Resolution Committee
of the Construction Institute
March 11, 2010 Los Angeles

Dispute Resolution Methods

An introductory survey of the construction
industrys commonly used dispute resolution
methods.
Negotiation
Mediation
Dispute Review Boards
Arbitration
Litigation

Opening Session
Session information compiled by members of the Dispute
Resolution Methods Sub-Committee of the Claims
Avoidance and Resolution Committee
Sub-Committee Members and Contributors:

Chair: Chip Ossman, Ossman Project Management Consulting, Inc.

Ken Haines, Nautilus Consulting, Inc.
Hal McKittrick, McKittrick & Associates
Ray Pixley, The City of New York
Larry Lenahan, McNally Tunneling, Inc.
And with grateful memory for his guidance and input, Frank Muller

What is a Dispute?
A Change Proposal?
A Rejected Change Proposal?
A Weather Day Definition?
A Claim?
A Delay Submittal?
An Or-Equal Equipment Submittal?

Dispute Resolution Methods

An Owner and a
Contractor
have a site meeting to
resolve some open issues.

Dispute Resolution Methods

Multiple primes, Designers, Owners,
Subcontractors, have a site meeting to
discuss project goal setting

Dispute Resolution Methods

Avoidance
Negotiation
Mediation
Dispute Review Board
Arbitration
Litigation
Self-help

Avoidance
Even avoidance isnt avoidance
In construction we have lots of reasons to avoid
confrontation
In construction, 99% of avoided disputes
become bigger they fester they dont
self-resolve
But sometimes
resolution takes
a while

Negotiation
Dispute resolution between the parties involving only
the parties
Casual
Conversations, emails, texts, phone calls

Formal
Meetings, documentation, presentations

Resolution
Regardless of how you got there:
Put it in writing

Elevating the Negotiation

Cant settle at the jobsite level?
Push the dispute upstairs bubble up
Again, only the parties are involved
May be multiple meetings
Resolution must be written

Mediation
Mediation: Bringing in a respected, neutral,
uninvolved person to help everyone reach a mutually
acceptable resolution
The mediator DOES NOT decide
Mediation may not resolve a dispute

Key Points
Voluntary
The resolution is binding, but the process is not
There is no such thing as Binding Mediation

You set the rules

Mediation
The Parties must agree to mediate
The Parties must select a mediator
The Contract may define mediation terms,
procedures, maybe even the mediator
Select a mediator with whom you are
comfortable and who you believe will also be
credible with the other parties

Mediation The Process

Parties provide the Mediator with information to
understand the dispute
The Mediator chooses to meet individually with the
parties, or to call all parties together in a joint session
After a sufficient exchange of information, the Mediator
breaks the parties apart and begins shuttle diplomacy
The Mediator works for you make the Mediator work,
not just shuffle back and forth

Mediation Resolution
Looking for Interests
$$
The Change
Request
Amount

The Apparent
Position

SS
Pro
jec

The Hidden, Unrecognized

Interests
The Next Change Request
Liquidated
Damages
Career

Budget

Cash Flow

I dont wanna analyze a detailed claim

What will the

Board Say?

Schedule

The Bottom Line

Client Relationship
Industry
Reputation

Mediation The Resolution

Mediators DO NOT Decide
The Parties decide

The Mediators Proposal

Usually offered at gridlock
Not always offered
May be requested
NOT binding until all parties accept
The process is still voluntary

Dispute Review Boards

A contractually defined process
3 members all are neutral:
Contractor nominated, Owner nominated
Those two appoint the 3rd neutral

Typically defined in the contract

But can be established any time the parties agree to do
so

Regular site visits

Conducts hearings

Dispute Review Board Hearings

Frequently no attorneys
Parties explain their version to the DRB
Exhibits, Calculations, Presentations
DRB hears and receives the information

Dispute Review Board Decisions

Check your contract terms vary
Typically non-binding but admissible
Probably the best independent evaluation
youll ever get for your problem

Arbitration
Arbitration is the submission of a dispute to one
or more impartial persons for a final and binding
decision, known as an "award."

Awards are made in writing and are generally

final and binding on the parties in the case.

From the American Arbitration Association website: www.adr.org

Non-Binding Arbitration
When the parties agree to Arbitrate, but also agree that
the result will only be binding if all parties agree to
accept the decision
Many view this as a dry-run
Could be considered similar to the Dispute Review
Board, but without the project knowledge of the DRB
members
In our Dispute Resolution Committees experience not
a common Dispute Resolution Methodology

Arbitration Getting There

Many times contract defined
Always an option if all parties agree
Variety of arbitration providers, including:
American Arbitration Association
JAMS: Judicial and Mediation Services
Most localities have regional providers
Private individuals

Arbitrator Selection
Big Benefit: You choose your Judge
Must be confirmed independent and unrelated
Look for folks who will understand your situation,
but without bringing too much bias and preconceived resolutions
Consider the expediency of a single arbitrator
versus the combined wisdom of a three-party
panel

The Hearings
NO Ex Parte communications
Arbitrator sets schedule
Proceedings are formalized through rules
Evidence is presented through sworn testimony
Arbitrator may question the witnesses and the
attorneys
Arbitrator sets, with party input, closing briefs,
submission timelines, and form of decision

The Decision
The Final Decision is Final
There are very few accepted ways to overturn a
Decision:
The Arbitrator failed to hear evidence
The Arbitrator was on the take, misbehavior
The Arbitrator exceeded the powers granted to the
Arbitrator

Other than winning an appeal using one or more of

those conditions you are stuck with the Decision.

Arbitration Pluses & Minuses

Finality
Letting a knowledgeable someone else decide
Speed
Cost
Evidence Rules Discovery, Depositions
Hearing Flexibility dates, format, location
Confidential Proceedings
Predictability

Litigation

May be a Federal or State Agency

Board of Contract Appeals, for example

In a courtroom, you get to choose

Judge: Bench Trial
Yesterday, the Judge sentenced a rapist to life, today, the Judge is
hearing you argue about money and time

Jury: Your Peers

Check that jury pool do any of them really understand the nuances of
a construction project?

Litigation
Getting There
Many times contract defined
Any party can initiate: Im gonna sue you!

Adjudicator Selection
The Judge is assigned
You may be able to choose a jury

Hearings
Strict rules of evidence
The Courts schedule your schedule just doesnt matter.

Litigation - Process
Tedious
Discovery produce Everything
Depositions
Motions, Legal Positioning
Pre-Trial Hearings
Finally, the Hearing itself

Litigation - Frustration
Cancel your vacation, youre scheduled to be in
Court
But the Court will delay, as you are trailing
When you do arrive, plan on short days with lots
of vacant time
Remember the money you are paying your team
to be there.

Litigation The Decision

Likely one party wont like the Decision
That party will then file for appeal
Regardless of entitlement
Filing is to slow the payment process
Frequently used to encourage the winner to accept
an immediate but smaller resolution

After years in Trial Court, now years of Appeals

And you may be sent back for a new trial

Litigation Closure
Im just so glad,
I won

In Summary
The Descending Arrow of Escalation
Avoidance
Self-Decided You Keep a Say
in the Decision

Negotiation
Mediation
Dispute Review Boards

Adapted from: Christopher Moores

The Mediation Process, 1996, p. 7

Arbitration

Adjudicated - Someone
Else Decides
Your Fate

Litigation

Closure

? and A
Whats Next?
A 15 minute break, then
Delay Claims from the Owners and
Contractors Perspectives