With credit tight or non-existent, development deals stalled or stopped, more bidders chasing fewer jobs and money flowing from lenders to owners to contractors slower than normal, the last thing the construction industry needs is more claims and disputes. Unfortunately, smaller profit margins and constricted cash flow often lead to more disputes and claims. In this atmosphere, what can be done to avoid expensive litigation and arbitration proceedings?
Two approaches to real-time dispute resolution prevent disputes from festering, becoming major claims and disrupting the successful completion of a project.
Project Neutral The first approach is to have the parties designate a project neutral, a trained dispute resolution specialist who joins the project at its inception and follows the building process from groundbreaking to completion. Unlike any other player on the construction team, the project neutral has only one client: the project itself.
This individual mediates and facilitates the resolution of disputes that cannot be resolved at the project management level and, if the parties agree, rules on matters so disputes can be resolved on an ongoing basis. Using a proactive approach, the neutral also can work with the project team to prevent many disputes by identifying and addressing potential problems.
Rapid Resolution If a neutral is not designated at the time of contracting, parties can turn to rapid resolution. This approach consists of real-time dispute resolution by “rapid responders” who are experienced and trained construction industry dispute resolution experts. They include mediators with legal backgrounds, as well as engineers and construction management experts who are prepared to meet with the parties within a few days of being called, gather information and give recommendations.
While most alternative dispute resolution providers offer panels of mediators and arbitrators who are only prepared to follow traditional methods—usually requiring months to put a process in place and bring the dispute to a conclusion—the rapid resolution team is prepared, on an immediate basis, to make an assessment of the dispute and recommend creative methods to resolve it.
For instance, if a dispute involved a structural engineering issue, a structural engineer member of the rapid resolution team might be brought in to make a neutral evaluation and recommendation (which could either be binding or non-binding). Similar approaches can be used for accounting, scheduling and legal issues.
Rapid resolution teams also can:
- facilitate and moderate structured negotiations between the parties;
- offer evaluative mediation;
- conduct binding or non-binding arbitrations on a fast-track basis using technical neutral experts as appropriate and as agreed on by the parties; and
- conduct proactive sessions with the parties to prevent future disputes.
No owner, contractor or design professional can afford protracted and expensive litigation or arbitration, particularly in the current economic environment. As it has in the past, the construction industry must adopt new and innovative ways of preventing, mitigating and quickly resolving disputes. By making sure project teams are familiar with project neutrals and rapid resolution, and incorporating these models into their arsenal of dispute resolution tools, construction executives can help organizations resolve their disputes efficiently, economically and fairly.