Risk Management Articles

Maintaining Control of a Project even when Problems Arise
By David T. Armstrong, Esq.

Design Professionals have monitored themselves over centuries of construction projects. Whenever a problem arises, those in charge of managing and designing projects quickly modify future documentation to protect themselves and the owners from a repeat of the errors or shortfalls. As technology has increased to investigate product failures and limitations, tighter specifications are drafted and made a part of each new construction project. All of this is an attempt to control the destiny of the project and to protect the people involved in its creation as well as the end users of the facilities. But after years of modifying specifications of products and application methods, the one major shortfall, which affects most construction projects, is how to resolve inevitable project conflicts. For some reason the major focus has been on resolving bricks and mortar issues and not on how a Design Professional can quickly resolve job site issues or latent defect claims. Yes, industry associations have developed standard contracts that delineate the use of mediation as an alternative to litigation, and if that fails, the use of the arbitration process; but does this standard language furnished by the associations really address this crucial issue as thoroughly as it could? Engineers no longer just specify foundation to be concrete. They are very specific in stipulating the mix formula, each component of the mix, how much water is to be added and when, at what temperatures it can be poured, how it is to be transported, how long it needs to be cured before use, how to seal or finish it, how it is to be placed, how attachments or implants are to be applied, what admixtures are acceptable, what tests are to be performed on it both at the job site and in labs, what standards those tests are required to meet and on and on. All in an attempt to have perfect clarity of expectations and end results with all the participants involved in that portion of the project. Each project is "unique" and involves special construction methods, means and components. Time frames and physical constraints for each project vary. Contractors management styles vary and they are often unknowns to the owner and Design Professional until selected by their "low bid" or recommended by a colleague. Design Professionals and management personnel or owners involved in the project often differ in philosophies of project management styles and how to address issues or conflicts as they arise. A standard conflict resolution clause furnished by a well intending association, may be as insufficient as a general specification, foundation to be concrete, to address specific issues and conflicts that are almost guaranteed in every construction project. The appropriate process and who will provide the service to resolve conflicts, needs to be analyzed as thoroughly as the concrete foundation has been, for each and every project.

There are an array of resolution processes, service providers, and neutrals that are available, that can be selected to suit a particular projects needs. Tribunals and associations vary in their qualifications to perform conflict resolution processes for construction oriented disputes. Some are staffed only with individuals from the judicial system who may tend to deal with the issues and conflicts from a legal perspective and not based on the facts of the dispute or industry standards. Some have neutrals from the construction industry such as general contractors, architects, engineers and construction attorneys. Some allow the parties to select the mediator or arbitrator and others make the selection for the parties. Some dispute resolution providers are staffed with part time neutrals and others with full-time trained professionals. Specifying the wrong tribunal with the wrong panelists can be as critical to the projects success, as the selection of a mix for the foundation concrete. The most commonly used methods of resolution in the construction industry are Dispute Review Boards, Mediation, Arbitration and Litigation. Each of these processes varies from one another and has different applications that need to be addressed by the Design Professional. Not one of these methods of resolving disputes is a panacea of conflict resolution. They each have their benefits and their shortfalls. It should be the endeavor of each Design Professional to know and understand the various processes, the appropriate tribunal or association and neutrals to use for each aspect of their projects. If the Design Professional does not specify a particular resolution process and tribunal, then the resolution of the conflicts on their projects will default to litigation. Are there benefits to litigation? Absolutely. If the conflict involves a legal or civil rights issue the courts are the appropriate process. But if the conflict or issue involves workmanship, scope of services, interpretation of specifications, delay claims, change orders, and other issues that commonly arise on construction projects, then the Design Professional should investigate alternative means and methods to resolve these conflicts. Litigation has proven to be too costly and too time consuming to be used to resolve typical conflicts and issues in the construction industry. Relationships between all the participants in the construction process are a delicate asset that if not respected by the selected process, can bring a project to an abrupt halt, affect the fiscal outcome of the project and unwittingly destroy reputations. In his 1984 State of the Judiciary Address, Chief Justice Warren Berger said, "The entire legal profession lawyers, judges, law teachers has become so mesmerized with the stimulation of the courtroom contest that we tend to forget that we ought to be healers of conflicts. For many claims, trials by adversarial contest, must in time go the way of the ancient trials by battle and blood... Our system is too costly, too painful, too destructive, too inefficient for a truly civilized people." Either the use of standard arbitration clauses or the lack thereof, by Design Professionals, has been tradition. Does a generic standard clause really address all the potential conflicts and how they should be resolved? When analyzing how disputes should be resolved on a particular project, many facets need to be considered. Such as;

These Questions can be answered and quite wisely with some research and investigation into each aspect of the project and its unique requirements. This inquiry can not be treated lightly, as the decision or answer to each of these questions can and will affect the quality, timing and success of each project. The required research basically boils down to an investigation of which process or combination of processes is most appropriate for each aspect of a particular project, which tribunal or association has the relevant rules and guidelines and a well-suited panel, and which of the above mentioned criteria is applicable to the project. Design Professionals must strive to educate themselves on how conflicts should be resolved, just as they have educated themselves on the concrete for the foundation. Mediation, arbitration and the use of dispute review boards can aid the owners, design professionals and contractors to minimize their frustrations when resolving conflicts. They can control the destiny of their projects beyond the bricks and mortar. Remember, if no process is delineated, the resolution of a conflict automatically defaults to litigation. Litigation has its benefits, but as discussed, is far to adversarial for the construction environment and experience demonstrates that resorting to lawsuits to settle construction disputes has many disadvantages. The net result is that all too often only the lawyers, consultants and expert witnesses benefit from the lengthy court actions and the destiny of the project is out of the owners, design professionals and contractors control. Maintain control of your projects by being process smart and writing a detailed specification for resolving disputes.

David Armstrong is an arbitrator, mediator and dispute review board panelist specializing in construction industry disputes. He is a risk management consultant to architects, engineers, suppliers and general contractors. He can be contacted through the Institute of Construction Management, PO Box 491220, Los Angeles, California, 90049, (310-440-1006).

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