Dispute Resolution Methods

1. Dispute Resolution Methods Annual Program of the Claims Avoidance and Resolution Committee of the Construction Institute March 11, 2010 – Los Angeles

2. Dispute Resolution Methods • An introductory survey of the construction industry’s commonly used dispute resolution methods. • Negotiation • Mediation • Dispute Review Boards • Arbitration • Litigation

3. 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

4. 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?

5. Dispute Resolution Methods An Owner and a Contractor have a site meeting to resolve some open issues.

6. Dispute Resolution Methods • Multiple primes, Designers, Owners, Subcontractors, have a site meeting to discuss project goal setting

7. Dispute Resolution Methods • Avoidance • Negotiation • Mediation • Dispute Review Board • Arbitration • Litigation • Self-help

8. Avoidance • Even avoidance isn’t avoidance • In construction we have lots of reasons to avoid confrontation • In construction, 99% of avoided disputes become bigger – they fester – they don’t self-resolveBut sometimesresolution takesa while …

9. 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

10. Elevating the Negotiation • Can’t 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

11. 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

12. 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

13. 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

14. Mediation Resolution – Looking for Interests $$The ChangeRequest Amount The Apparent Position SS Project The Hidden, Unrecognized Interests The Next Change Request Liquidated Damages Cash Flow Budget I don’t wanna analyze a detailed claim Career Client Relationship Schedule What will the Board Say? Industry Reputation The Bottom Line

15. Mediation – The Resolution • Mediators DO NOT Decide • The Parties decide • The Mediator’s Proposal • Usually offered at gridlock • Not always offered • May be requested • NOT binding until all parties accept • The process is still voluntary

16. 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

17. Dispute Review Board Hearings • Frequently “no attorneys” • Parties explain their version to the DRB • Exhibits, Calculations, Presentations • DRB hears and receives the information

18. Dispute Review Board Decisions • Check your contract – terms vary • Typically non-binding but admissible • Probably the best independent evaluation you’ll ever get for your problem

19. 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

20. 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 Committee’s experience – not a common Dispute Resolution Methodology

21. 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

22. 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 pre-conceived resolutions • Consider the expediency of a single arbitrator versus the combined wisdom of a three-party panel

23. 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

24. 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.

25. Arbitration Pluses & Minuses • Finality • Letting a knowledgeable someone else decide • Speed • Cost • Evidence Rules – Discovery, Depositions • Hearing Flexibility – dates, format, location • Confidential Proceedings • Predictability

26. 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?

27. Litigation • Getting There • Many times contract defined • Any party can initiate: “I’m gonna sue you!” • Adjudicator Selection • The Judge is assigned • You may be able to choose a jury • Hearings • Strict rules of evidence • The Court’s schedule – your schedule just doesn’t matter.

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

29. Litigation - Frustration • Cancel your vacation, you’re 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.

30. Litigation – The Decision • Likely one party won’t 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

31. Litigation Closure I’m just so glad, I won…

32. In Summary – The Descending Arrow of Escalation Avoidance Negotiation Mediation Self-Decided - You Keep a Say in the Decision Dispute Review Boards Adapted from: Christopher Moore’s The Mediation Process, 1996, p. 7 Adjudicated - Someone Else Decides Your Fate Arbitration Litigation

33. Closure ? and A What’s Next? A 15 minute break, then Delay Claims from the Owner’s and Contractor’s Perspectives