Building Industry Magazine - October 2013 - (Page 52)
BestPractices
SOLVING CONSTRUCTION DISPUTES:
A Practical Approach
Construction has always been a
risky business. With every passing year,
the levels of risk and complexity climb,
causing owners and contractors to shift
the risk to those lower on the supply
chain. “Risk transfer” creates all
types of exclusions, additional provisions, and addendums being added
to cost proposals—not all of which
make it into the final contract.
Contract disputes permeate our
industry today, and they can literally
put an organization out of business.
That’s why I’ve become such a big
believer in the benefits of mediation.
Mediation is a dispute resolution
method which takes the place of
arbitration or litigation. The mediator
is an impartial person who brings the
contracting parties to a dispute resolution. It is not a win/lose proposition
(neither party can say they’ve “won”),
but rather a process where acceptable
solutions are reached by both parties.
In my view, it’s a great tool to resolve
disputes with far less time and money.
Why Mediate?
Mediation is a means of reducing
risk and saving money. Often, disagreements in construction involve many
parties and large amounts of money,
not to mention the huge emotional
toll. When a contractor goes to court
or binding arbitration, he is publicly
placing the outcome into hands of
people who are not in the construction
industry. Inevitably, the losing side will
say that, in some way, the arbitrator/
judge did not truly understand the
nature of the construction issue. When
mediation is used, the contractor has a
large say in the resolution. This permits
a higher probability of an agreedupon solution. Mediation opens the
door for creative solutions instead of
the standard award of damages and
attribution of blame.
Mediation is particularly useful
in very complex, multi-party cases
because it can resolve a portion of the
dispute while allowing the most contentious facets of the case to proceed
onward to arbitration. Additionally,
mediation allows the parties to walk
away at any time, creating a risk-free
system to explore potential solutions.
When to Mediate
Prior to beginning mediation,
consider the following questions
with your team:
What is the key outcome you’re
seeking?
In a perfect world, if the dispute
were settled today, what would it
look like to you?
What is the highest amount of
money you are willing to pay or the
lowest you are willing to accept in
order to settle?
Conversely, what is the most
important issue to the other side(s)?
How much money do you think it
will take for the other side(s) to settle?
If the other party offers an
apology, will that make a difference
in the settlement amount?
How to Prepare
First, carefully review the dispute
resolution clause in your contract. This
should include a written notification to
the other party and a time period for its
resolution. If you’re not already doing so,
I recommend including language such
BY GARRETT J. SULLIVAN
as that below to your future contracts:
If the dispute is not resolved within
the agreed-upon time period, the parties
agree to attempt to settle such claims or
disputes by non-binding mediation first
before moving to arbitration. Should
mediation not be successful, the parties
shall still have the right to proceed with
binding arbitration.
Second, select a mediator. Usually
each party will have their legal
counsel assist them in selecting the
names of three mediators. From the
pool of mediators, all parties should
agree upon one—ideally someone
with construction knowledge and
the ability to trim back emotion to
reveal the real problem.
Your third step is to go into the
mediation with an open mind. Allow
for meaningful dialogue. Consider
your options carefully and keep your
eye on your desired outcome. This
leads me to your final step: once the
issue is resolved, learn from the experience. Things can and do go wrong on
the jobsite. There are learning lessons
all around. Be sure to hold a debriefing
session with your key employees to
glean as much as you can from the
experience and to insulate yourself as
much as possible in the future.
Recap
Overall, mediation is a valuable
tool that should not be overlooked.
Statistics show that it resolves
disputes approximately 80% of
the time. With odds like that, I
recommend that you allow a skilled
mediator to guide you through a creative solution in any future disputes.
You have virtually no downside risk. BI
Garrett Sullivan is president of Sullivan & Associates, Inc., a management consultancy focused on the construction industry.
Connect with him at GSullivan@SullivanHi.com, www.SullivanHi.com or 808.478.2564.
52 | BUILDING INDUSTRY | OCTOBER 2013
http://www.SullivanHi.com
Table of Contents for the Digital Edition of Building Industry Magazine - October 2013
HEAVY EQUIPMENT
HAWAII STEEL ALLIANCE RESOURCE DIRECTORY
INSIDE THE BIA
INFRASTRUCTURE
NEWS BEAT HONBLUE Pacific Building Trade Expo
Coffman Engineers ranks 58th
DOT fuel pier at Kalaeloa Barbers Point Harbor
Hawthorne Cat hosts demo day
ABC 12th Annual Golf Tournament
GCA Hawaii hosts Construction Update
True Life Cos. Buys Acreage on Big Island
Coco Palms: rebuilding an island icon
DEPARTMENTS Datebook
Spotlight on Success: Physical Fitness Center Camp Smith, Marine Corps Base Hawaii
Contracts Awarded
Low Bids
Concept to Completion: ANdAZ Maui at Wailea Resort & Spa
Best Practices:SOLVING CONSTRUCTION DISPUTES
Best Practices: SOLVING CONSTRUCTION DISPUTES
Newsmakers
New Products
Building Industry Magazine - October 2013
https://www.nxtbook.com/trade/bi/0315
https://www.nxtbook.com/trade/bi/0215
https://www.nxtbook.com/trade/bi/0115
https://www.nxtbook.com/trade/bi/1214
https://www.nxtbook.com/trade/bi/1114
https://www.nxtbook.com/trade/bi/1014
https://www.nxtbook.com/trade/bi/0914
https://www.nxtbook.com/trade/bi/0814
https://www.nxtbook.com/trade/bi/0714
https://www.nxtbook.com/trade/bi/0614
https://www.nxtbook.com/trade/bi/0514
https://www.nxtbook.com/trade/bi/0414
https://www.nxtbook.com/trade/bi/0314
https://www.nxtbook.com/trade/bi/0214
https://www.nxtbook.com/trade/bi/0114
https://www.nxtbook.com/trade/bi/1213
https://www.nxtbook.com/trade/bi/1113
https://www.nxtbook.com/trade/bi/1013
https://www.nxtbook.com/trade/bi/0913
https://www.nxtbook.com/trade/bi/0813
https://www.nxtbook.com/trade/bi/0713
https://www.nxtbook.com/trade/bi/0613
https://www.nxtbook.com/trade/bi/0513
https://www.nxtbook.com/trade/bi/0413
https://www.nxtbook.com/trade/bi/0313
https://www.nxtbook.com/trade/bi/0213
https://www.nxtbook.com/trade/bi/0113
https://www.nxtbook.com/trade/bi/1212
https://www.nxtbook.com/trade/bi/1112
https://www.nxtbook.com/trade/bi/1012
https://www.nxtbook.com/trade/bi/0912
https://www.nxtbook.com/trade/bi/0812
https://www.nxtbook.com/trade/bi/0712
https://www.nxtbook.com/trade/bi/0612
https://www.nxtbook.com/trade/bi/0512
https://www.nxtbook.com/trade/bi/0412
https://www.nxtbook.com/trade/bi/0312
https://www.nxtbook.com/trade/bi/0212
https://www.nxtbook.com/trade/bi/0112
https://www.nxtbook.com/trade/bi/1211
https://www.nxtbook.com/trade/bi/1111
https://www.nxtbook.com/trade/bi/1011
https://www.nxtbook.com/trade/bi/0911
https://www.nxtbook.com/trade/bi/0811
https://www.nxtbook.com/trade/bi/0711
https://www.nxtbook.com/trade/bi/0611
https://www.nxtbook.com/trade/bi/0511
https://www.nxtbook.com/trade/bi/201103_bldngIndustry_nxtd
https://www.nxtbook.com/trade/bi/0411
https://www.nxtbookmedia.com