Dispute Resolution MethodsAnnual Program of theClaims Avoidance and Resolution Committee of the Construction InstituteMarch 11, 2010 Los Angeles

Dispute Resolution MethodsAn introductory survey of the construction industrys commonly used dispute resolution methods.NegotiationMediationDispute Review BoardsArbitrationLitigation

Opening SessionSession 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 & AssociatesRay Pixley, The City of New YorkLarry 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 MethodsAn Owner and a Contractorhave a site meeting toresolve some open issues.

Dispute Resolution MethodsMultiple primes, Designers, Owners, Subcontractors, have a site meeting to discuss project goal setting

Dispute Resolution MethodsAvoidanceNegotiationMediationDispute Review BoardArbitrationLitigationSelf-help

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

NegotiationDispute resolution between the parties involving only the partiesCasualConversations, emails, texts, phone callsFormalMeetings, documentation, presentationsResolutionRegardless of how you got there: Put it in writing

Elevating the NegotiationCant settle at the jobsite level?Push the dispute upstairs bubble upAgain, only the parties are involvedMay be multiple meetingsResolution must be written

MediationMediation: Bringing in a respected, neutral, uninvolved person to help everyone reach a mutually acceptable resolutionThe mediator DOES NOT decideMediation may not resolve a disputeKey PointsVoluntaryThe resolution is binding, but the process is notThere is no such thing as Binding MediationYou set the rules

MediationThe Parties must agree to mediateThe Parties must select a mediatorThe Contract may define mediation terms, procedures, maybe even the mediatorSelect a mediator with whom you are comfortable and who you believe will also be credible with the other parties

Mediation The ProcessParties provide the Mediator with information to understand the disputeThe Mediator chooses to meet individually with the parties, or to call all parties together in a joint sessionAfter a sufficient exchange of information, the Mediator breaks the parties apart and begins shuttle diplomacyThe Mediator works for you make the Mediator work, not just shuffle back and forth

Mediation Resolution Looking for Interests$$ The Change Request AmountBudgetCareerScheduleCash FlowClient RelationshipLiquidatedDamagesIndustryReputationThe Bottom LineThe Next Change RequestThe Apparent PositionThe Hidden, Unrecognized InterestsWhat will theBoard Say?SS ProjectI dont wanna analyze a detailed claim

Mediation The ResolutionMediators DO NOT DecideThe Parties decideThe Mediators ProposalUsually offered at gridlockNot always offeredMay be requestedNOT binding until all parties acceptThe process is still voluntary

Dispute Review BoardsA contractually defined process3 members all are neutral: Contractor nominated, Owner nominatedThose two appoint the 3rd neutralTypically defined in the contractBut can be established any time the parties agree to do soRegular site visitsConducts hearings

Dispute Review Board HearingsFrequently no attorneysParties explain their version to the DRBExhibits, Calculations, PresentationsDRB hears and receives the information

Dispute Review Board DecisionsCheck your contract terms vary

Typically non-binding but admissible

Probably the best independent evaluation youll ever get for your problem

ArbitrationArbitration 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 ArbitrationWhen the parties agree to Arbitrate, but also agree that the result will only be binding if all parties agree to accept the decisionMany view this as a dry-run Could be considered similar to the Dispute Review Board, but without the project knowledge of the DRB membersIn our Dispute Resolution Committees experience not a common Dispute Resolution Methodology

Arbitration Getting ThereMany times contract definedAlways an option if all parties agreeVariety of arbitration providers, including:American Arbitration AssociationJAMS: Judicial and Mediation ServicesMost localities have regional providersPrivate individuals

Arbitrator SelectionBig Benefit: You choose your JudgeMust be confirmed independent and unrelatedLook for folks who will understand your situation, but without bringing too much bias and pre-conceived resolutionsConsider the expediency of a single arbitrator versus the combined wisdom of a three-party panel

The HearingsNO Ex Parte communicationsArbitrator sets scheduleProceedings are formalized through rulesEvidence is presented through sworn testimonyArbitrator may question the witnesses and the attorneysArbitrator sets, with party input, closing briefs, submission timelines, and form of decision

The DecisionThe Final Decision is FinalThere are very few accepted ways to overturn a Decision:The Arbitrator failed to hear evidenceThe Arbitrator was on the take, misbehaviorThe Arbitrator exceeded the powers granted to the ArbitratorOther than winning an appeal using one or more of those conditions you are stuck with the Decision.

Arbitration Pluses & MinusesFinalityLetting a knowledgeable someone else decideSpeedCostEvidence Rules Discovery, DepositionsHearing Flexibility dates, format, locationConfidential ProceedingsPredictability

Litigation

May be a Federal or State AgencyBoard of Contract Appeals, for exampleIn a courtroom, you get to chooseJudge: Bench TrialYesterday, the Judge sentenced a rapist to life, today, the Judge is hearing you argue about money and timeJury: Your PeersCheck that jury pool do any of them really understand the nuances of a construction project?

Litigation Getting ThereMany times contract definedAny party can initiate: Im gonna sue you!Adjudicator SelectionThe Judge is assignedYou may be able to choose a juryHearingsStrict rules of evidenceThe Courts schedule your schedule just doesnt matter.

Litigation - ProcessTediousDiscovery produce EverythingDepositionsMotions, Legal PositioningPre-Trial HearingsFinally, the Hearing itself

Litigation - FrustrationCancel your vacation, youre scheduled to be in CourtBut the Court will delay, as you are trailingWhen you do arrive, plan on short days with lots of vacant timeRemember the money you are paying your team to be there.

Litigation The DecisionLikely one party wont like the DecisionThat party will then file for appealRegardless of entitlementFiling is to slow the payment process Frequently used to encourage the winner to accept an immediate but smaller resolutionAfter years in Trial Court, now years of AppealsAnd you may be sent back for a new trial

Litigation ClosureIm just so glad, I won

Avoidance

Negotiation

Mediation

Self-Decided - You Keep a Say in the DecisionAdjudicated - Someone Else Decides Your FateAdapted from: Christopher Moores The Mediation Process, 1996, p. 7 Dispute Review Boards Arbitration Litigation In Summary The Descending Arrow of Escalation

Closure ? and A

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

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