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Dispute Prevention and Conflict Avoidance for the Construction Industry
a California Pilot Program by the American Arbitration Association


PARTNERING
MEDIATION
ON-SITE NEUTRALS
DISPUTE REVIEW BOARDS
FACILITATED NEGOTIATIONS FACILITATED MEETINGS

TABLE OF CONTENTS

PARTNERING

MEDIATION

OTHER DISPUTE AVOIDANCE SYSTEMS TO THINK ABOUT

About the American Arbitration Association

PARTNERING

Partnering is a way of unifying all the parties or stakeholders to a project or job into a team. While a Partnering charter is usually created, the charter is not a contract or a change to the existing contract, but a recognition that everyone on the job will perform under their actual contracts in good faith. Partnering is actually a process which establishes working relationships among all the stakeholders which includes communication and commitment to the job and each other. People work together through the Partnering process as they will do on the job itself. Partnering creates trust, teamwork and cooperation so that projects can be completed successfully.

Partnering takes place at a workshop or retreat before construction begins. All of the primary stakeholders, including the owner or developer, architect/engineers, general contractor, key sub-contractors and major material suppliers should attend. The agenda of the workshop is to begin the Partnering process itself, and begin working under the major elements of Partnering.

At the workshop or retreat, problem areas are identified, methods of communication are worked out, as many potential solutions as possible are decided upon early, all of which leads to improved decision making and rapid response.

What are the Components of the Partnering Process?

1. COMMITMENT.

Every firm on the job must commit themselves to the Partnering charter. The commitment must come from top management, the people with authority to bind their firms. The Partnering charter does not define the legal relationships as that is accomplished by the contract, but the charter itself is a symbol of the commitment to the efficient good faith completion of the job. Once the commitment is made, decision making on the job should take place at the lowest level possible.

2. RECOGNITION OF THE INTERESTS OF THE STAKEHOLDERS.

All of the stakeholders' interests are discussed during the Partnering workshop, and the signers to the Partnering charter commit to satisfy the requirements of everyone for successful project completion. People begin to learn to think in "win-win" terms.

3. GOALS AND OBJECTIVES DEFINED.

All of the participants in the Partnering workshop figure out their mutual self-interests. In those areas where there is agreement, the goals become part of the Partnering charter. The goals may include such things as not losing time due to accidents, limiting costs, finding savings through value engineering, and minimizing paperwork for the purpose of defending a case. Any goal that may be of interest to the project and its participants may become part of the Partnering charter.

4. BUILDING TRUST AND TEAMWORK.

Partnering creates better understanding and communication. When people are aware of each other's concerns and challenges, they are better able to work as a unified group toward the common goals. Working together toward common ends creates a sense of trust and fair play.

5. WORKING STRATEGIES.

All the parties to the job work out methods and strategies to implement and achieve the mutual goals and how to work through and solve problems.

6. PERIODIC REVIEW.

During the course of the job, the stakeholders perform joint evaluation on how progress is being made in achieving the goals of the Partnering charter. This allows the plan to proceed as everyone intended, and also make sure that everyone is carrying their share of the load.

7. RAPID RESPONSE.

The quick communications and decision making under Partnering can prevent problems from growing into major conflicts. It saves time and money. The Partnering process encourages rapid resolution of problems, and most often will prevent problems from growing into major conflicts. It saves time and money. The Partnering process encourages rapid resolution of problems, and most often will prevent problems from escalating into unresolved issues to be "kicked upstairs."

What are Some of the Advantages of Partnering?

Potential Problems with Partnering

What Partnering is Not

Benefits of Partnering

Future Benefits of Partnering

Partnering allows people to work as a team. Work itself becomes more meaningful and fun, and morale runs high. People will integrate the values of fairness and integrity, which affects all aspects of their personal and business lives. By demonstrating integrity and fair dealing, one wins the respect of others. That respect builds participants in Partnering a reputation of being able to provide true value in whatever industry they pursue.

MEDIATION

Although mediation is generally viewed as a dispute resolution procedure, its nature as a process that is voluntary and under the control of the parties with a neutral mediator facilitating negotiations, makes it invaluable as a dispute prevention method. There are some variations on the mediation process which can be tailored specifically for your project, which are discussed below. While the American Arbitration Association is the world's largest provider of mediation services, its panel of mediators is actually quite small. The mediators provided for you by the American Arbitration Association have been carefully selected for their skills, knowledge, experience, reputation and integrity.

It is important to understand that mediation is not arbitration. In arbitration a decision is made and an award is issued. As a neutral convener, a mediator makes no decision for the parties, but brings them together to aid them in assessing their differences, to separate the emotions from the issues, and to help the parties arrive at reasonable and realistic solutions.

Mediation is one of the fastest growing fields of dispute resolution and dispute prevention today because it is designed to maximize the interest satisfaction of all of the stakeholders to the greatest extent possible, resulting in what have become popularly known as "win-win" agreements.

Mediation is confidential, which keeps disputes or conflicts quietly in-house. Unwanted publicity is avoided, which allows the parties or stakeholders to resolve problems on their own terms. As the stakeholders have control and ownership over the mediation process, they control its outcomes. Nothing is decided unless the stakeholders agree to it.

Mediation is popular because it is fast, and has the highest potential for satisfying the needs of parties to a conflict than any other dispute resolution procedure. While all alternative dispute resolution procedures have been demonstrated to be far less costly than traditional litigation, mediation is one of the most cost-effective processes available.

Perhaps the greatest advantage to mediation over other dispute resolution procedures is that mediation recognizes the importance of ongoing relationships. People who have productive business relations need to maintain them and make them grow. Unlike adversarial proceedings, which leave people angry and frustrated, typically destroying any hope of a future relationship, mediation has actually been proven to be one of the few available healing processes available in the commercial or industrial economic sectors.

Mediation is voluntary. It is not subject to control by third parties such as judges or arbitrators, and no one has a better understanding of the facts of the matter and what fair solutions are than the parties themselves.

Mediation works best when it is used early. This is not only due to cost-benefit factors, but because early intervention will prevent conflicts from escalating or taking on a life of their own. The longer problems go on, the more they cost. If these problems can be nipped in the bud, it is to everyone's' benefit, and mutual gain is achieved.

Mediation is portable; it can be done anywhere. It can take place in a conference room, an office, or even on the project site itself.

Due to the tremendous advantages of mediation, including cost-effectiveness, portability, rapidity of resolution and highly satisfactory outcomes, mediation integrated into a project as a standing dispute prevention and conflict avoidance system should be given serious consideration. The San Francisco office of the American Arbitration Association will be pleased to work with you in developing a dispute prevention system for your project, or as all of our Partnering facilitators are also highly experienced and trained mediators, such a system can be developed as part of a partnering workshop.

Feel free to contact the San Francisco office and ask for copies of Mediation: A Guide for Business People or Business Mediation, What You Need to Know.

OTHER DISPUTE AVOIDANCE SYSTEMS TO THINK ABOUT

Whether as a result of a Partnering workshop or as an independent technique, there are other dispute prevention systems worth knowing about. AAA believes that these systems are best developed during a Partnering workshop; however, they have been used successfully over the years on projects that have not utilized Partnering. These other techniques such as on-site neutrals, dispute review boards and facilitations are variations on existing alternative dispute resolution procedures such as arbitration and mediation, but have been specially tailored for use on a specific project, as well as being integrated into the project for early dispute prevention.

The American Arbitration Association has the capability of working with you to craft a dispute prevention and conflict avoidance system for your project. All of our facilitators have extensive experience as neutral arbitrators and mediators and thus are intimately familiar with the tools of alternative dispute resolution, having acted as neutrals on many complex cases in addition to their facilitation training and experience.

On-Site Neutrals

An on-site neutral is actually a mediator hired by the stakeholders to help resolve problems before they escalate into full fledged disputes. Mediation is not arbitration or fact-finding, but is a method of facilitated negotiations conducted by a highly trained neutral skilled both in the art of negotiation, and in your industry.

The on-site neutral is generally familiar with the plans and specifications for the job, and will generally attend any project meetings which take place during the job.

When problems do arise, or the unexpected happens, the on-site neutral is in a position to immediately convene the stakeholders to work out solutions and resolutions. The on-site neutral does not make decisions for the parties or impose end-results, but utilizes mediation techniques to allow the stakeholders to figure out solutions which meet the greatest number of interests for all concerned stakeholders as possible.

If you are unfamiliar with mediation, you will find such AAA publications as Business Mediation, What You Need To Know, extremely helpful.

Can an On-Site Neutral be used with a Partnering Charter?

Yes! In fact when a Partnering charter results from a Partnering workshop, such a charter will typically contain dispute resolution mechanisms. Partnering, dispute review boards and on-site neutrals are not interchangeable, but they work very well whether used independently, or in conjunction with one another. On-site neutrals and dispute review boards can be stand-alone processes, but work best after team building through Partnering has taken place.

How does AAA handle the costs of an On-Site Neutral?

The on-site neutral is generally compensated equally by the primary stakeholders, with no change in the contract price.

How does AAA assign On-Site Neutrals?

The AAA maintains a short list of highly qualified neutrals, and will send you biographical and professional information on them so that you can choose neutrals who appear most appropriate for your project. If you decide to ask AAA to assign an on-site neutral, we will do so.

Am I limited to one On-Site Neutral?

One of the great advantages to utilizing the American Arbitration Association programs is our experience in working with people to develop processes to meet their needs. Your firm and the other stakeholders can create the dispute prevention system that is right for your project. If you desire a panel of two or three on-site neutrals, or a rotating panel as is used in other alternative procedures, you can certainly do so.

Dispute Review Boards

Dispute review boards have the same ultimate goal as Partnering and on-site neutrals. It is a way to prevent disputes from escalating and to obtain quick, satisfactory, fair and cost-effective resolutions when problems arise on a project. A dispute review board consists of an ongoing panel which visits the project site regularly to keep abreast of the progress. The board also meets before the project begins to review plans and specifications. When disputes arise, the board recommends resolution immediately before the defensive posturing by parties begins. Dispute review boards are extremely helpful on any project with a strong possibility of dispute or claims.

How do Dispute Review Boards differ from On-Site Neutrals?

A dispute review board is structured differently, and has a different kind of authority. The dispute review board typically will consist of three members: a member appointed by the owner, a member appointed by the prime contractor, and a third party selected by the owner's and contractor's board members. The third member becomes the chairperson of the dispute review board. All board members are subject to the approval of the other parties. There may be important variations on the theme such as board members not being affiliated with either party before or during the project, and the members should be familiar with the type of project involved. Most of the time board members are actually independent from the project rather than a part of it, as in Partnering. Costs are shared by the parties.

Can the rules of the Dispute Review Board be varied?

The beauty of any alternative dispute resolution, conflict prevention or dispute avoidance system is that you can tailor procedures and rules to the specific needs of your project, company and industry. For instance, if the parties believe they have a better method of selecting the neutral members of the dispute review board, they are free to write such rules any way they want. Dispute review boards have been called "preventative litigation of claims" allowing timely low cost resolution as problems arise on complex projects.

Facilitated Negotiations/Facilitated Meetings

It is not unusual when major projects are undertaken to encounter conflict early in the planning stage. Objections often come from many corners such as agencies, environmental groups, neighborhood associations, citizens groups, and sometimes political organizations or politicians. Outside objections have also arisen once projects are underway whether due to the fact that organizations or groups may not have been aware of the project during the planning stages, or due to a problem affecting public health and safety or environmental degradation occurring on the project once it is underway or in operation. In these instances it can be extremely advantageous to resolve or defuse the conflict as early as possible.

As society, governmental requirements and industry become more complex, their relationships also increase in complexity. Communication is often poor and misunderstandings abound. A unique feature of the program on dispute prevention and conflict avoidance is our ability to provide neutral negotiation facilitators to bring together agencies, the public, governmental bodies and their departments, who often have conflicting goals, regulations or requirements.

Further compounding the problem, these entities often are not in direct communication with each other. As an example, it is unfortunately common for a city or country to complete a planning process and then have a state or federal agency step in and demand additional requirements or announce they find the plan in non-compliance after construction is underway. In other situations, agencies have been known to announce non-compliance after construction is underway.

In these situations, American Arbitration Association facilitators who are familiar with environmental issues, understand environmental impact reports, and have various levels of experience in planning processes, can come in not to act as negotiators on behalf of any of the stakeholders or other entities, but to improve communication, and aid the parties in identifying the real issues of actual importance, allowing the various parties to negotiate productively. Using a process very similar to mediation, facilitated negotiations can save significant amounts of time and money.

Often times planning or project commencement result in public uproar in spite of and often because of the nature of a public hearing process. Facilitated meetings on public policy and planning matters can be extremely beneficial as people perceive they are included in a fair proceeding conducted by neutrals. Facilitated meetings can defuse anger and frustration, allow everyone to air legitimate concerns while allowing progress to be made. Facilitated meetings allow a wide ranging, free and open discussion to take place in a manner a public hearing cannot. Public understanding can be increased, and fears allayed. Facilitated meetings have an ability to bring widely disparate opinions together and build consensus understandings. Formats can range from relatively small workshops to larger gatherings. By using facilitated meetings as a conflict prevention device, environmental litigation can be avoided and support, rather than protest, can be generated.

As in any dispute prevention or conflict avoidance procedure, the earlier that it is utilized, the more satisfactory are the results. A series of public workshops early in a project planning process can be extremely helpful, saving time and money for all concerned.

Facilitated public meetings have been found to be invaluable in the environmental area when public accusations of environmental degradation as a result of project construction has occurred, or in the industrial area where there have been public outcries over such matters as chemical or waste discharges. Such a public meeting allows concerned community members to air their grievances, while allowing a company or agency a forum to communicate concerns, mitigations, and future preventive plans. An advantage of utilizing facilitators from a neutral organization such as AAA is a greater degree of trust in the process.

The American Arbitration Association can provide experienced, neutral facilitators to keep negotiations on track, or to facilitate successful public meetings and workshops. Feel free to contact AAA if you desire more information, or to arrange for neutrals.

If you have any questions about this program, or any other American Arbitration Association program, please contact us at:

American Arbitration Association
417 Montgomery Street, 5th Floor San Francisco, CA 94104-1113
415/981-3901 FAX 415/781-8426

Attribution

The American Arbitration Association, the largest and oldest provider of neutrals in the private sector, is again the forefront of developing innovative processes for industry and commerce. Already the world's leader in providing dispute resolution services such as arbitration and mediation, AAA has moved beyond dispute resolution into developing conflict avoidance and dispute prevention systems.

Utilizing AAA's expertise, a panel of highly respected, experienced and skilled facilitators has been assembled and trained to help you develop systems to bring your project the time and cost saving benefits of completion on schedule, on or under budget, without rancorous litigation.

This publication is intended to provide an overview of the processes available to you. Once you decide to use Partnering or other dispute avoidance techniques, AAA facilitators can work with you and the other project stakeholders to develop a unique system geared to providing the most efficient dispute prevention program for your specific project and the firms working with you.

As dispute avoidance is such a new field, AAA can arrange for a team of facilitators to meet with your senior management and project managers to educate them on the process before the project workshops begin.

Other publications available from the American Arbitration Association on this topic are: Drafting Partnering Language: A Practical Guide and Partnering: New Dimensions in Dispute Prevention and Resolution.

The information in this and all other RISK Administration and Management Company articles is intended for information purposes only and does not constitute legal advice. For legal advice and assistance, please contact competent counsel in the jurisdiction of your professional practice.

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