Mediation∕Arbitration: Alternative Dispute Resolution Process

Interest in alternative dispute resolution (ADR) techniques for the construction industry has grown in recent years. Traditional litigation has been criticized on several fronts. The traditional procedures are often cumbersome, expensive, and lengthy. The outcome of litigation is uncertain and often confusing. For certain cases, alternative procedures may be useful in quickly resolving disputes. Sometimes there is no alternative to litigation. Each case is unique, and the appropriate form of dispute resolution mechanism must be established for each project. This paper reviews the process of mediation∕arbitration, and compares that process to other alternative dispute resolution procedures.     

Impact of the EU Mediation Directive on the German Construction Sector

The European Union (EU) Mediation Directive of 2008 has to be transposed into German law by 2011. German law already complies with the Directive to a large extent. The only action that needs to be taken concerns the loosely defined obligations regarding the quality of mediation and the mediator’s right to refuse to give evidence. In both cases, only the law governing cross-border disputes needs to be amended. Nevertheless, it is likely that the Directive will have a significant impact on the German construction sector. In terms of cross-border disputes, German companies involved in other EU member states will feel the impact directly because the Directive makes mediation more effective by creating a consistent European framework that provides a balanced relationship between mediation and judicial proceedings. In terms of domestic mediations, the impacts of the Directive will be more indirect. The German lawmaker is likely to go beyond the requirements set out in the Directive, at least by applying the new rules to both cross-border and domestic mediations, but perhaps even by introducing incentives for mediation which are not required by the Directive.     

Exploring the Influence of Contract Governance on Construction Dispute Negotiation

The obligations and rights of the contracting parties are typically set out in the conditions of contract. The attempt to have a “water-proof” contract that caters to all eventualities has turned contracts into management manuals with detailed contractual procedures to deal with, inter alia, performance, changes, payment, approval, and dispute resolution. Contract disputes, therefore, have to be negotiated within the ambits of the contracts. This study revisits the assumption of free negotiation that underpins most conventional negotiation studies, i.e., negotiation is free with rational negotiators who can walk away from the negotiating table at will. Constraints imposed by a contract are collectively described as contract governance. With taxonomies developed through principal component factor analyses for contract governance (CG) and negotiating behaviors (NH), the influence of CG and NH is explored by a Pearson correlation analysis. In general, it was found that dominating and obliging behaviors are mostly influenced by CG while compromising behavior is the least influenced. It was further found that procedural requirements influence all types of negotiators under the Rahim organizational conflict inventory except integrators. This suggests that if negotiators are having concern for both themselves as well as their counterparts, amicable settlement is possible notwithstanding the complex procedural requirements.     

Moderating Effect of Equity Sensitivity on Behavior-Outcome Relationships in Construction Dispute Negotiation

This study builds on Adam’s equity theory by examining the moderating effects of equity sensitivity (i.e., a person’s perception of what is equitable or inequitable) on behavior-outcome relationships among negotiators in construction dispute negotiation. First, an equity sensitivity construct is developed. This construct reveals that most construction negotiators are entitleds, also known as “takers,” at the negotiation table. Moderated multiple regression (MMR) is used to test the moderating effects of equity sensitivity. The MMR models affirm that the nature of behavior-outcome relationships varies, depending on the perception of equity. An entitled construction negotiator is found to be a versatile moderator who fosters satisfactory negotiation outcomes. The models show that negotiators are able to predict inequitable responses and to take measures to forestall or deal with different inequitable situations. This study indicates the merit of further study of equity theory in the context of construction dispute negotiation. Future challenges in this area include the examination of the equity restoration responses of negotiators to create an equitable environment.     

Dynamic Conflict Management in Large-Scale Design and Construction Projects

The construction industry plays a major role in both the economy and infrastructure project delivery worldwide. However, one major critical characteristic of the construction industry is the high cost incurred by the resolution of arising conflicts in projects. As a result, project managers are seeking ways to avoid conflicts and resolve them effectively and equitably when they happen. This paper discusses the dynamic nature of conflicts in terms of their evolution and escalation within a project and the interaction between conflicts and dispute avoidance and resolution techniques (DART). The paper also presents the background and development of a conflict management system, entitled the DART Simulator (DART-S). The intent of the DART-S is to provide project managers with a comprehensive and integrated approach to evaluate the impact of a DART implementation on the reduction of conflicts. The simulator was built using a system dynamic modeling within a visual simulation environment. The core of the simulator was developed by using data from literature on the nature of conflicts, dispute resolution processes, and the potential effectiveness of 46 different DART-S on conflict avoidance and resolution. The simulator was then tested and verified with a case study comparing the traditional two-step dispute resolution process with a five-step dispute resolution process. The results of this comparison clearly show that the five-step dispute resolution process is able to decrease the initial number of conflicts of a project, reduce the number of conflicts which may escalate to a higher step in the resolution process, and provide resolutions of conflicts before they reach litigation. By quantifying the amount of conflicts, evaluating the evolution of conflicts, and assessing the impact of DART implementation on conflict escalation, the DART-S provides project managers with an integrated strategy for conflict management.     

The Effective Mediator

Mediation is becoming the premier method of resolving disputes within the construction industry. The linchpin to the mediation process is the mediator. An effective mediator may make the difference between mediation success or failure. Yet, considering the importance of an effective mediator, there is a dearth of information as to the attributes of one and how to recognize and retain one. Considering the importance of mediation in the arbitration process as well as the trend toward court ordered mediation, it behooves industry members to understand the attributes of an effective mediator. This paper will discuss the skills an effective mediator needs to assist the parties in moving forward, crafting a sustainable settlement as well as leave the disputing parties and their counsel satisfied with the process and result. It will alert readers what to look for when engaging a mediator’s service and what questions need to be asked in the quest for the effective mediator to assist in the resolution of disputes.     

Construction Mediation Landscape in the Civil Justice System in Hong Kong

Alternative dispute resolution techniques as means to speedily and economically resolve certain types of disputes have been well recognized. In this regard, some jurisdictions have opted to use mandatory adjudication to deal with construction, in particular payment-related disputes. The situation in Hong Kong is a bit different. The Government of the Hong Kong Special Administrative Region aspires to make Hong Kong a hub for arbitration and mediation services for the region. Voluntary mediation has been introduced in the civil procedures rules of the High Court as part of the newly launched Civil Justice Reform. Adverse cost order is used to discourage “refusal to mediate” and “failing to attempt to mediate.” While the new measures that came into effect on April 2, 2009, sound sensible, a better picture on the actual impacts will unfold as more cases reach the Court. Nonetheless, the cost sanction may be able to make the voluntary use of mediation less voluntary.     

Insight into Resolving Construction Disputes by Mediation/Adjudication in Hong Kong

Resolving construction disputes using an adversarial approach is considered to be in opposition of the maintenance of a harmonious relationship between two parties. The modern arbitration process may emulate the litigation proceeding leading to delay and cost escalation. During the past decade, the Hong Kong Government has implemented a mediation clause as an alternative mode for settlement of construction disputes. In this paper, the experience and insight into resolving construction disputes by integrating mediation and then arbitration in Hong Kong are highlighted. The state-of-the-art modern mediation process and its philosophical origins are reviewed. The shortcomings of the present system are pinpointed. The success of the adjudication now practiced in the United Kingdom may suggest that there is a place for another process of dispute resolution, which may help improve the situation. The prospect of the proposed mediation/adjudication and then arbitration mechanism is discussed with particular reference to the construction industry in Hong Kong.     

Lessons Learned from Principled Negotiation in International Construction Projects

Compared with other dispute resolution approaches, negotiation is still the easiest, most efficient, and most time- and cost-saving approach, if conducted appropriately. However, dispute resolution in international construction projects faces many unique challenges. This requires effective negotiation approaches, principles, and strategies. Although principled negotiation has been developed for more than two decades and is widely accepted by academics as an effective approach to solving conflicts and disputes, its applications in industries are still very limited. Practitioners need applicable guidelines and lessons learned. This paper, by reviewing and analyzing the negotiation processes in two international projects, discusses the key challenges facing construction dispute negotiation and the applications and limitations of principled negotiation in dispute resolution.     

Engineer’s Study Notes for Understanding the Arbitration Process

Using arbitration to resolve commercial disputes has many advantages over court-based litigation. These include the use of “judges” who understand the relevant technical issues and industry practices and thus reduce the probability of unpredictable results can significantly reduce the cost and delay associated with document exchange and depositions and can reduce the amount of time spent on evidence presentation in hearings. Engineers can play an important role when determining whether their organizations and their clients arbitrate or litigate. The use of arbitration requires contractual agreement. Without the inclusion of predispute arbitration procedures in the project’s contracts, it is likely that disputes will be resolved through litigation and not arbitration. Engineers can influence the inclusion of arbitration because they often suggest the forms of project contracts as representatives of engineering, contracting, or owner organizations. Engineers may also find themselves in management roles where they will be involved in a dispute that will be resolved via arbitration. As a party to the arbitration, it is important for the engineer to understand what influence he or she has in making decisions regarding the arbitration process. This paper provides guidance to engineers who are in a position to influence the inclusion of arbitration in the project contracts. This paper also provides suggestions about how the engineer can work with the attorneys to influence the best and most cost- and time-efficient result in the event an arbitration has been commenced. This paper is not a theoretical research paper but rather is a practical guideline based on the experience of the writers, who are engineers and who have been in the arbitration field, both domestically and internationally for over 30?years, seeing the good, the bad, and the ugly. Together, they share their insights on why the arbitration process can be the better choice for dispute resolution.     

Quantification of Costs for Dispute Resolution Procedures in the Construction Industry

The extent to which disputes affect the construction industry has been well-documented. There are a plethora of anecdotal stories, and even some data that explain how unresolved conflict can impact project cost, schedule, and quality. In response, many systems and procedures have been developed to address disputes and their resolution within the construction industry. However, no data exist that quantitatively compare these various alternatives and the real costs of resolving a dispute using methods other than litigation. This paper presents a framework for identifying and capturing the transactional costs incurred to resolve disputes throughout the full spectrum of resolution options. Transactional cost data from 46 recently completed construction projects, totaling over $2 billion of total installed costs, confirm that these sums can account for a large portion of the settlement/award amount, the original claim amount, and even the total contract value when using some dispute resolution methods. Furthermore, using dispute trend and cost data, a comprehensive dispute management system based upon the concepts of risk management is proposed, highlighting the overriding objective of promoting dispute avoidance/resolution in the most cost-efficient manner possible.     

Efficacy of Trust-Building Tactics in Construction Mediation

Distrust hinders disputing parties and mediators from achieving mediation success. Mediators therefore often use different trust-building tactics to generate some degree of trust in themselves and in the mediation process. This paper reports a study that identified the trust-building tactics used by construction mediators and examined the efficacy of these tactics with respect to their outcomes. Three study stages were designed. With reference to the mediation model of Sloan (1998), trust-building tactics and outcomes were first identified in Stage I. Next, the data were collected from accredited mediators with a questionnaire survey in Stage II. The collected data were then validated via reliability assessments in Stage III. With the use of multiple regression analyses, the efficacy of the trust-building tactics was examined by relating these tactics to their outcomes. The findings of this study suggest that the trust-building tactics used in Step 4 (i.e., explore interests) of Sloan’s (1998) mediation model are influential in developing trust among disputing parties and that they can also act as a time-saving tool in the mediation process. Furthermore, it was found that mediators can earn trust by adopting the trust-building tactics used in Step 3 (i.e., issues and trust) of Sloan’s (1998) model. These tactics can also serve to improve the relationships between the disputing parties. The results show that the trust-building tactics used in the final step (i.e., solutions) of Sloan’s (1998) model seem to have low efficacy in developing trust among disputing parties.     

Developing Case-Based Communities of Practice for Teaching the Legal Aspects of Construction: Lessons Learned in Taiwan

To enhance the learning for graduate students to understand legal issues and dispute resolution in the construction industry, students can be provided with a learning platform for exchanging and sharing knowledge and experience among students and experienced instructors. With the assistance of the Internet, construction law related experiences acquired from previous projects can be discussed and shared with students. This study utilizes the case-based communities of practice approach to capture and manage engineer experiences. Via the case-based communities of practice approach, students and instructors can exchange and share discussions and comments related to selected topics and cases. The proposed case-based communities of practice learning (CCPL) system was developed and demonstrated to be effective when applied to teach students about construction law at a university in Taiwan. Construction law related experiences can be taught and shared among students, thus enhancing students’ abilities to resolve problems and disputes related to construction law. The combined results of various case studies demonstrate that the application of the CCPL system to the legal aspects of construction courses offers an effective means of sharing practical legal knowledge and experience, especially among graduate students who lack previous legal experience.     

Logistic Likelihood Analysis of Mediation Outcomes

Dispute persists in all building and construction projects. Alternative dispute resolution methods are now commonly used as a means to resolve construction disputes. Mediation, interalia, is the popular choice in Hong Kong due to its cost-saving, flexible, speedy, confidential, and voluntary attributes. In mediation, tactics used by a mediator is central in driving desired outcomes. This paper reports a study that employs logistic regression (LR) to predict mediation outcomes respective to the tactics used. To achieve this, three main stages of work are involved. First, taxonomies of mediator tactics and mediation outcomes were developed. With these, the second stage included the development of logistic regression models each with a mediation outcome taxonomy as dependent variables and the taxonomies of tactics as independent variables. In the third stage of the study, the LR models were validated using an independent set of testing data. The LR models suggested that “win-win settlement,” “progress,” “improvement,” and “time advantage” are responsive to mediator tactics of “ice-breaking,” “trust building,” “encourage for self-improve,” and “process control,” respectively. In addition, it is observed that these relationships are positively correlated.     

Progress of Statutory Adjudication as a Means of Resolving Disputes in Construction in the United Kingdom

This paper reports on a longitudinal study on the progress of statutory adjudication in the United Kingdom since its commencement in 1998. This study was carried out by the Adjudication Reporting Centre at Glasgow Caledonian University and it considers the statistical data provided by both Adjudicator Nominating Bodies and adjudicators themselves. Various trends are shown and reasons explored. These trends include the growth in adjudication referrals, numbers of adjudicators, causes of disputes, sums of money in dispute, seasonal trends, monitoring of adjudicators’ performance, procedures adopted, time limits, fees, etc. There is evidence that the disputes, while still predominantly about payment and valuation issues, are becoming larger and more complex. The impact of statutory adjudication on other forms of dispute resolution is considered.     

Mediation for Public Construction Contracts under the GPA in Taiwan

The purpose of this paper is to examine mediation for public construction contracts under the Government Procurement Act (GPA) in Taiwan. The World Trade Organization Committee on Government Procurement, on December 9, 2008, adopted a decision that invites Taiwan to accede to the plurilateral agreement. Government procurement accounts for in the range of 15–20% of gross domestic product, on average, in developed countries. At the same time, the number of disputant cases over public construction contracts reached 70% of contract disputes under GPA between January and March in 2009 according to the official statistical information of Taiwan. In recent years, there are specific measures of the dispute settlement mechanism, especially in mediation under GPA, to be enacted and implemented. As the growing attention given to the Agreement of Government Procurement in Taiwan, the dispute settlement mechanism regarding government procurement has become an important issue. Therefore, this paper probes into the developments of mediation for public construction contracts under Taiwan’s government procurement. It is hoped that the discussion of the study will help the reforms of the dispute settlement mechanism of government procurement in Taiwan and also be beneficial for both Taiwan and international contractors.     

Adjudication in the United Kingdom: Constitutional Implications

Good ideas are often overtaken by great events. That happened to adjudication. Originally envisaged as a single concept applying across the United Kingdom, it has been overtaken by more significant constitutional change. This paper takes a look at that process. Something of a parallel could perhaps be drawn with the individual states in the United States each introducing a similar form of legislation. The possibility exists, of course, of each area adopting a different approach but the indications are that certain communality is developing in adjudication and it is, perhaps, a measure of the success of the concept of adjudication that it is being voluntarily adopted in other dependency areas such as the Isle of Man.     

Evolution of Statutory Adjudication as a Form of Dispute Resolution in the U.K. Construction Industry

This paper reports on the rapid growth in the use of this form of dispute resolution and its apparent decline. It considers how this novel form of dispute resolution has changed in nature from its original limited role of providing a speedy and inexpensive process of resolving disputes so that cash could flow in the industry and be of help primarily to those in the lower reaches of the subcontracting chain into a highly developed legal process which has increasingly been utilized for large and contractually complex disputes. Statutory adjudication is still used extensively in the U.K. construction industry as the method of choice to resolve disputes, many of which would previously have gone to court or to arbitration. Data for this study were provided by the Adjudication Reporting Center at Glasgow Caledonian University.     

Effectiveness of Dispute Review Boards

A Dispute Review Board (DRB) is a panel of three respected, experienced industry professionals jointly selected by the owner and contractor of a project and established at the beginning of a construction project. It meets regularly at the job site to be briefed on the work, the schedule, and any potential issues in dispute. With the use of DRB growing, a pilot study was undertaken to determine the attitudes of industry members concerning its effectiveness in preventing and contemporaneously resolving disputes.     

Ten Years on: Review of Adjudication in the United Kingdom

The Housing Grants, Construction and Regeneration Act 1996 introduced statutory based adjudication into the United Kingdom. Since then there has been a volume of case law regarding enforcement of adjudication decisions and clarifications of procedural issues. This paper looks at the fundamentals of adjudication under the Housing Grants, Construction and Regeneration Act, trends in adjudication case law, and certain procedural clarifications from recent case law.