This document discusses various methods of dispute resolution for construction contracts, including litigation, arbitration, mediation, and negotiation. It provides details on arbitration and mediation processes and contract provisions. Key aspects of dispute resolution covered are the different dispute resolution methods, selecting arbitrators and mediators, contract reviews for arbitration provisions, and tips for negotiation, mediation and arbitration. Risk management strategies for construction projects are also summarized, including risk assessment, analysis and mitigation planning.

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Robert C. NewcomerRobert C. Newcomer, Esq./LEED AP
rnewcomer@langlegal.com The Lang Legal Group LLC
http://www.linkedin.com/in/robertnewcomer Atlanta, Georgia 404.320.0990
Commercial LitigationCommercial Litigation
Business, real estate and environmental lawBusiness, real estate and environmental law
Sustainable Atlanta,
Member, Sustainable Building Taskforce,
Urban Land Institute
 Chair, Technical Assistance Program
 Advisory Board/Management Committee
Green Chamber of the South
 Inaugural Director, Board Secretary
EduKalb, Inc.
 Inaugural Director, Board Treasurer

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CONSTRUCTION CONTRACTING (Fall 2010)
Building Construction Program, Georgia Tech (November 16, 2010)
Methods of Dispute Resolution
 Litigation
 Arbitration
 Mediation
 Negotiation
 Dispute Avoidance
 Risk Management

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Parties
S u re ty
S u b c o n tra c to r S u b c o n tra c to r S u p p lie r
G e n e ra l C o n tra c to r
O w n e r
A rc h ite c t

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Dispute Resolution:
LITIGATION

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DISPUTE RESOLUTION
DISPUTE RESOLUTION - MEDIATION AND ARBITRATION.
This document contains provisions for mediation and arbitration of
claims and disputes. Mediation is a non-binding process, but is
mandatory under the terms of this document. Arbitration is
mandatory under the terms of this document and binding in most
states and under the Federal Arbitration Act. In a minority of
states, arbitration provisions relating to future disputes are not
enforceable but the parties may agree to arbitrate after the dispute
arises. Even in those states, under certain circumstances (for
example, in a transaction involving interstate commerce),
arbitration provisions may be enforceable under the Federal
Arbitration Act.
AIA General Conditions (A201-1997)

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ARBITRATION: What is it?
 Private adjudication
 Impartial third party
 By written agreement (usually)
 Parties can select arbitrator
 Parties can customize process

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ARBITRATION: Basic steps
 Agreement to arbitrate
 Demand for arbitration
 Select arbitrator(s)
 Pre-arbitration meeting (scheduling/discovery)
 Arbitration hearing
 Post arbitration memorandum (optional)
 Decision and award

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ARBITRATION: Standard Agreements
4.6 ARBITRATION
4.6.1 Any Claim arising out of or related to the Contract, except claims
relating to aesthetic effect and except those waived as provided for in
subparagraphs 4.3.10,9.10.4 and 9.10.5, shall, after decision by the Architect or
30 days after submission of the Claim to the Architect, be subject to
arbitration. Prior to arbitration, the parties shall endeavor to resolve disputes
by mediation in accordance with the provisions of paragraph 4.5.
4.6.2 Claims not resolved by mediation shall be decided by arbitration which,
unless the parties mutually agree otherwise, shall be in accordance with the
Construction Industry Arbitration Rules of the American Arbitration
Association currently in effect. The demand for arbitration shall be filed in
writing with the other party to the Contract and with the American Arbitration
Association, and a copy shall be filed with the Architect.
AIA General Conditions (A201-1997)

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ARBITRATION: Advantages
 Private
 Decision-maker can be knowledgeable
 Process can be flexible and move fast
 Can cost less
 Limited grounds for appeal
 Enforceability of award

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ARBITRATION: Disadvantages
 Cost can be high
 Lack of formal discovery:
 Waiver of right to jury
 Limited rights of appeal
 No precedent

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ARBITRATION
 Jury decision
 Legal precedent
 Special legal relief
 Formal discovery desired
 Slower/costlier strategy
 Broader appeal rights
When might arbitration not be desirable?

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Finding the Right Arbitrator
 Identify the ideal qualifications
 Review resume and written qualifications
 Seek referrals and recommendations and comments
on judgment and fairness
 Request written disclosure of potential conflicts
Get it right  Limited rights to appeal decision

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Arbitration: “Styles”
 Traditional
 Fast track
 Baseball
 High-low

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Arbitration tip: Contract Review
 Some GAA provisions can be waived in contract
 Modify contract to fit needs and circumstances
 Include at least limited discovery rights
 Provide for fast-track procedures
 Review scope of insurance coverage
 Limit award to actual and compensatory damages
 Allow Arbitrator to retain jurisdiction for a time

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ARBITRATION: Hearing strategy and tactics
 Focus early on key issues
 Be proactive
 Stipulate to undisputed facts and issues
 Use joint exhibits
 Consider bifurcation, interim decisions of
threshold issues and neutral fact finder
 Always “on stage”

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Dispute Resolution: MEDIATION
What is Mediation?
 Voluntary and non-binding process
 Impartial third party “facilitates” agreement
 Parties control the agreement

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MEDIATION: Basic Steps
 Agreement to mediate
 Select mediator
 Mediation statement
 Mediation meeting
 Outcome . . . ???

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MEDIATION: Standard Contracts
4.6 ARBITRATION
4.6.1 Any Claim arising out of or related to the Contract, except claims
relating to aesthetic effect and except those waived as provided for in
subparagraphs 4.3.10,9.10.4 and 9.10.5, shall, after decision by the architect
or 30 days after submission of the Claim to the Architect, be subject to
arbitration. Prior to arbitration, the parties shall endeavor to resolve
disputes by mediation in accordance with the provisions of paragraph 4.5.
4.6.2 Claims not resolved by mediation shall be decided by arbitration which,
unless the parties mutually agree otherwise, shall be in accordance with the
Construction Industry Arbitration Rules of the American Arbitration
Association currently in effect. The demand for arbitration shall be filed in
writing with the other party to the Contract and with the American
Arbitration Association, and a copy shall be filed with the Architect.
AIA General Conditions (A201-1997)

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MEDIATION: Standard Contracts
4.5 MEDIATION
4.5.1 Any Claim arising out of or related to the Contract, except Claims relating to
aesthetic effect and except those waived as provided for in Subparagraphs 4.3.10,
9.10.4 and 9.10.5 shall, after initial decision by the Architect or 30 days after
submission of the Claim to the Architect, be subject to mediation as a condition
precedent to arbitration or the institution of legal or equitable proceedings by
either party.
4.5.2 The parties shall endeavor to resolve their Claims by mediation which,
unless the parties mutually agree otherwise, shall be in accordance with the
Construction Industry Mediation Rules of the American Arbitration Association
currently in effect. Request for mediation shall be filed in writing with the other party
to the Contract and with the American Arbitration Association. The request may be
made concurrently with the filing of a demand for arbitration but, in such event,
mediation shall proceed in advance of arbitration or legal or equitable proceedings,
which shall be stayed pending mediation for a period of 60 days from the date of
filing, unless stayed for a longer period by agreement of the parties or court order.
AIA General Conditions (A201-1997)

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MEDIATION
What Does a Mediator Do?
 Convenes
 Facilitates communication
 Encourages negotiation
 Identifies/creates opportunities for resolution

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MEDIATION
Why consider mediation?
 Quick and inexpensive
 Highly effective
 Resolutions are durable
 Private and confidential
 Protects relationships
 Low risk: Parties retain decision-making control

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MEDIATION
Selecting a Good Mediator:
 Identify the ideal qualifications
 Review resume and written qualifications
 Seek referrals and recommendations and comments
on judgment and fairness
 Request written disclosure of potential conflicts
 Consider effectiveness with the other side(s)

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MEDIATION: “Styles”
 Transformative
 Facilitative
 Evaluative
 Muscle

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MEDIATION: Tips
 Customize the process
 Select the right mediator and engage them
 Identify and include decision makers
 Know your case strengths and weaknesses
 Present a powerful summary
 Communicate the strengths of your case
 Listen
 Identify “win-win” settlement options

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MEDIATION: Settlement agreements
 Mediation is voluntary and non-binding
 Settlement may (should) be enforceable
 Document terms of settlement before leaving
 Include enforcement provisions
 Incorporate “simple” dispute resolution process
 Protect relationships

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DISPUTE RESOLUTION: NEGOTIATION
 Most common form of dispute resolution
 Most cost-effective and durable
 Most likely to preserve relationships
 Available anytime, anywhere, to anyone

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DISPUTE RESOLUTION: AVOIDANCEDISPUTE RESOLUTION: AVOIDANCE
 Failure to identify risk
 Failure to properly assess and/or manage risk
 Lack of clear and agreed-upon expectations
 Failure to meet expectations
 Other . . . ???

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RISK MANAGEMENTRISK MANAGEMENT
 Introduction
 Risk Assessment and Management
 Construction Contracting
 Process
 Risk Management
 Key Issues

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RISK: INTRODUCTIONRISK: INTRODUCTION
Risk is a measure of future uncertainties. . .
It is tough to make predictions,
especially about the future.
Yogi BerraYogi Berra
Risk management is the overarching process that
encompasses identification, analysis, mitigation
planning and plan implementation, and tracking.
Risk Management Guide for DOD AcquisitionRisk Management Guide for DOD Acquisition
August 2006August 2006

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RISK MANAGEMENT: Executive SummaryRISK MANAGEMENT: Executive Summary
30

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RISK ASSESSMENT AND MANAGEMENTRISK ASSESSMENT AND MANAGEMENT
 Risk Assessment Principles
 Risk Management Process
 Risk Analysis
 Risk Mitigation
 Go/No-go decision
 Project Risk Reviews

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RISK ASSESSMENT: PRINCIPLESRISK ASSESSMENT: PRINCIPLES
The impossible sometimes happens;
the inevitable sometimes does not.
Daniel Kahneman, Nobel Prize EconomistDaniel Kahneman, Nobel Prize Economist
There are things we know,
things we know we don't know,
and things we don't know we don't know.
Donald Rumsfeld, Secretary of DefenseDonald Rumsfeld, Secretary of Defense

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RISK MANAGEMENT PROCESS

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RISK ANALYSISRISK ANALYSIS
34

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FMI/CMAA Survey of Owners--2008
35

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~ Is the most cost effective,
~ Assigns each risk to the party that is best
equipped to manage and minimize that risk,
~ Recognizes the project’s unique
circumstances.
Construction Industry Institute
The Ideal ConstructionThe Ideal Construction
ContractContract

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The Construction Contracting ProcessThe Construction Contracting Process
 Steps from bid to completion and approvalsSteps from bid to completion and approvals
 The Contract as a Risk Management ToolThe Contract as a Risk Management Tool
 Contract: Key IssuesContract: Key Issues
 Project Risk Mitigation PlansProject Risk Mitigation Plans

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The Contract as a Risk Management ToolThe Contract as a Risk Management Tool
1. Accept
2. Minimize
3. Limit
4. Transfer
1. Accept
2. Minimize
3. Limit
4. Transfer
CONTRACONTRA
CTCT
SUBCONTRASUBCONTRA
CTCT
SUBCONTRACTOR,
SUBCONSULTANT OR
SUPPLIER
Risk
OWNER ARCHITECT, CONTRACTOR,
CONSTRUCTION MANAGER
or DESIGN-BUILDER
Risk
38

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Key Contract IssuesKey Contract Issues
1. Scope
2. Performance Standards
3. Changes
4. Loss Shifting
5. Schedule
39

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Key Contract Issues:Key Contract Issues: ScopeScope
 Division of Responsibility
 Detail
 Exclusions
 Deliverables
 Clarifications
 Contingency
40

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Key Contract Issues:Key Contract Issues: PerformancePerformance
 Standard of Care
 Warranties
 Performance Guarantees
41

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Key Contract Issues:Key Contract Issues: ChangesChanges
 Changes
 Changed Conditions
 Force Majeure
 Commodity Price Spikes
42

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Key Contract Issues:Key Contract Issues: Loss ShiftingLoss Shifting
 Indemnity
 Waivers of Consequential Damages
 Limitation of Liability
43

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Key Contract Issues:Key Contract Issues: Schedule
 Time extensions
 No damage provisions
 Liquidated damages
 Incentives
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Risk is a choice rather than a fate.Risk is a choice rather than a fate.
Peter BernsteinPeter Bernstein

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Robert C. Newcomer, Esq./LEED AP
rnewcomer@langlegal.com The Lang Legal Group LLC
http://www.linkedin.com/in/robertnewcomer Atlanta, Georgia 404.320.0990
Commercial Litigation
Business, real estate and environmental law
Sustainable Building Taskforce,
Sustainable Atlanta
Urban Land Institute:
 Chair, Technical Assistance Program
 Board/Management Committee
Green Chamber of the South:
 Inaugural Director, Board Secretary
EduKalb, Inc.
 Inaugural Director, Board Treasurer