Smarter Dispute Resolution
By Dan Fauchier
Just because your building is set in stone doesn't mean your conflict resolution system should be as well. Most construction contracts and subcontracts contain some mechanism for claims or dispute resolution. Of course, these provisions are written by attorneys, so the conflict resolution system typically involves using attorneys ? theirs and yours ? pitted against each other. Guess who wins? The attorneys.
The way I see it, construction people tend to disagree more frequently than most. That is because there is so much risk ? known and unknown ? in every construction project. Our contracts and subcontracts are instruments for assigning risk between the parties. The risks become a "hot potato" that no one wants, so we keep tossing it to someone else.
When we disagree about who owns the risk, we invoke the contract's conflict resolution system, which usually means that, even if mediation is one of the steps, the end of the road is a lawsuit decided by a judge, jury or arbitrator who knows little about construction. By the time you reach this point, you have also accumulated attorneys' fees, lost downtime that you could have put toward a more productive project, and delayed payment ? making losers of both sides.
Don't be bound by these "set-in-stone" systems. If possible, keep your disagreements in the change order section of the contract. The change order spec is usually very robust, allowing for both direct and indirect costs to be included. Use it.
In construction, when two parties disagree about additional costs or delays, it is usually because we don't trust the other guy's interpretations of the events or contract, or we don't trust the other guy's data of facts, numbers and calculations.
The solution? Pay for what you need. When negotiation fails, before you both hire attorneys, suggest that both sides work together to find out the truth by hiring one independent attorney and/or forensic consultant to review the facts, contract and circumstances and to make an independent, non-binding recommendation on entitlement (the "what") and quantum ("how much"). Give them only a few weeks to do their analysis. Split the cost. Once both sides see the unbiased facts of the dispute, you have an unbiased, unemotional basis for reaching an informed decision ? all within the change order system!
It's a little like going to marriage counseling instead of divorce court. And it works.
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