construction contract dispute resolution

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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 LitigationBusiness, 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 co n tra c to r S u b co n tra c to r S u p p lie r

G e n era l C o n tra c to r

O w n er

A rch ite ct

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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 Agreements4.6 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: MEDIATIONWhat 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 Contracts4.6 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 Contracts4.5 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 Acquisition Risk Management Guide for DOD Acquisition August 2006August 2006

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RISK MANAGEMENT: Executive SummaryRISK MANAGEMENT: Executive Summary

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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

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35FMI/CMAA Survey of Owners--2008

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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 Construction The Ideal Construction Contract Contract

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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

CONTRACCONTRACTT

SUBCONTRACSUBCONTRACTT

SUBCONTRACTOR, SUBCONSULTANT OR SUPPLIER

Risk

OWNER ARCHITECT, CONTRACTOR,CONSTRUCTION MANAGERor DESIGN-BUILDER

Risk

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Key Contract IssuesKey Contract Issues

1. Scope2. Performance Standards3. Changes4. Loss Shifting5. Schedule

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Key Contract Issues: Key Contract Issues: ScopeScope

Division of Responsibility Detail Exclusions Deliverables Clarifications Contingency

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Key Contract Issues: Key Contract Issues: PerformancePerformance

Standard of Care Warranties Performance Guarantees

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Key Contract Issues: Key Contract Issues: ChangesChanges

Changes Changed Conditions Force Majeure Commodity Price Spikes

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Key Contract Issues: Key Contract Issues: Loss ShiftingLoss Shifting

Indemnity Waivers of Consequential Damages Limitation of Liability

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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 Peter BernsteinBernstein

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Robert C. Newcomer, Esq./LEED AP rnewcomer@langlegal.com The Lang Legal Group LLChttp://www.linkedin.com/in/robertnewcomer Atlanta, Georgia 404.320.0990

Commercial LitigationBusiness, 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