Sunday, September 26, 2010

Dispute Resolution on an Integrated Project

Welcome to the Collaborative Revolution!

This post should be read alongside the "Integrated Insurance Products Needed" post I wrote yesterday.

Experienced integrated team members often resist use and deployment of effective dispute resolution mechanisms.  Sage veterans contend the mere existence of dispute resolution mechanism encourage novice team members to surface disputes that would otherwise not arise.  I respectfully disagree.

The purpose of an effective dispute resolution mechanism in an integrated agreement is to provide a framework within which inevitable disputes can be resolved efficiently.  Disputes - aka clashes of interests - are inevitable on any construction project and integrated teams that have clear rules for resolving disputes within the four corners of the integrated agreement are more likely to resolve disputes in ways that limit the impact of the dispute on the project as a whole.

Granted, experienced team members who have a history of trust and cooperation are unlikely to surface disputes against loyal and trusted team mates.  However, novice participants often instigate disputes and veteran team members can often be drawn into those disputes.  Agreeing in advance on a dispute resolution process will empower the entire team - not just the veteran core team mbers - to resolve disputes effectively.

Integrated construction teams should look for three features in an effective dispute resolution program.  First, it must be structured in a laddered manner that empowers all team members with boots on the ground to surface and resolve minor disputes, thus preventing the festering of a problem.  Second, integrated team members must select a mediator / arbitrator with relevant experience who has earned - or can earn - the trust of all members of the integrated team.  Third, the program must protect the lien rights of suppliers and contractors while ensuring resolution of claims within the four corners of the integrated agreement itself.
 A laddered program that empowers all members of the integrated team is one that enjoys buy in from key leaders involved with every entity on the project and which empowers each such entities ground level personnel to initiated the dispute resolution process as necessary.  A laddered dispute resolution program is one that is initiated by field level personnel, but which progresses up the chain of command to the executive level if necessary.  Buy in is achieved by having consultants, trade contractors, suppliers and other key project participants sign joining agreements that bind those entities to the core collaborative principles set forth in the original integrated agreement.

Selection of an effective mediator / arbitrator is critical.  Core team members - which generally includes the owner, contractor, designer and select trade contractors - must select a person with relevant industry experience to serve as the mediator / arbitrator.  If the team is building a hospital select an experienced level headed project superintendent who has been inolved in the construction of a hosptial before.  If you are building bridge find someone who has built bridges, etc. etc.  Too often, cases are mediated in the construction arena by judges and or arbitrators who know nothing about the specific project.  Which leads to the second point.  The mediator / arbitrator must be retained under an agreement that requires site visits and a regular schedule of dispute resolution meetings, even if actual disputes have not yet been identified as such.  These meetings are designed to ferret out festering issues, surface them and resolve them before they become real problems.  This is what I call preventive lawyering when I do it.  It is highly effective and has an enormous ROI. 

Finally, an effective dispute resolution program must protect the lien rights of suppliers and contractors. Integrated teams that fail to protect the lien rights of key stake holders in their integrated agreements whistling past the graveyard.  In most jurisdictions contractual waivers of lien rights are invalid, and is a better practice to preserve those lien rights.  By protecting those lien rights in the actual agreement you relieve a lot of heartburn on the part of the suppliers and contractors and their risk management team.  Such provisions are both novel and complex, but Collaborative Construction has worked out many of the details critical to making such lien provisions work.

For more information about how to craft, negotiate and deploy an effective integrated agreement - including an effective dispute resolution mechanism - do not hesitate to contact Collaborative Construction.

James L. Salmon, Esq.
69 West Southgate
Fort Thomas, Kentucky 41075
Collaborative Construction Resources, LLC
Collaborative Construction Website
International BUILT Association Website
Sustainable Land Development International

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