Summary of Managing Construction Conflict: Unfinished Revolution, Continuing Evolution (Part II)

In Part II of Managing Construction Conflict: Unfinished Revolution, Continuing Evolution, Professor Stipanowich discusses which of the dispute resolution methods from the end of the twentieth century are still used today and describes the current situation of dispute resolution in the construction industry.

He first explains that partnering (explained in Part I) never really came into general use and “is typically a feature of public construction programs…” He notes, however, that “some studies have indicated that the use of partnering has resulted in more projects being completed on or ahead of schedule, in improved contract administration, reduced claims and disputes, reduced owner engineering and administrative expenses, and more value engineering.”

Professor Stipanowich then describes the relatively new concept of integrated project delivery (IPD), which combines elements of partnering and relational, collaboration-oriented contracts. He states,

IPD models are founded on a multiparty agreement between primary stakeholders in design and construction, a commitment to collaboration built on trust, and defining success mutually in terms of project outcomes rather than individual goals. IPDs enable design decisions to be enhanced by the involvement of all team members and the free flow of technical and budgetary information. Successful IPD requires effective, open communication, and for this reason considerable effort must be given to establishing protocols for the use and management of information, including building information modeling (BIM).

Professor Stipanowich next comments on the evolution of “real-time” jobsite resolution. He starts with the evolution of dispute review boards (DRB)(explained in Part I):

According to early statistics developed by the Dispute Review Board Foundation, the leading advocacy group for the process, DRBs achieved an extraordinary level of success, both in terms of the number of claims apparently settled after a DRB hearing and the prophylactic effect on disputes of the very presence in place of a DRB. Although there is little quantitative evidence actually linking DRBs to lower project costs and fewer delays and disruptions, industry perceptions of the DRBs tend to be very positive; a number of public contracting authorities are convinced of their value and committed to their use.

He notes that the “statutory adjudication” (explained in Part I) in Britain also experienced great success with the “vast majority” of adjudication decisions accepted by the losing parties.  According to Professor Stipanowich dispute resolution advisors (explained in Part I), on the other hand, have seen limited use.

Professor Stipanowich then turns to mediation and explains that “[i]n the United States, mediation has become the dominant template for third-party intervention in conflict, including construction disputes, and it appears to be in a growth mode throughout the world.” He notes, however, that

in the United States, where modern mediation first took root, mediation processes, like arbitration, have evolved along lines very different from those imagined by early proponents. Some originally envisioned mediation as a revolutionary mechanism capable of encouraging disputants to assume a primary role in resolving their own conflict, repairing broken relationships, promoting interest-based solutions, and even opening up the justice system by engaging people from different disciplines and community sectors as mediators. But while mediation is capable of achieving all of these things and to some extent has done so, some believe it has fallen short of its promise.

He goes on to discuss the role of lawyers in the mediation process saying, “[a]lthough there are many positive aspects to the continuing, evolving relationship between lawyers and mediation, there is concern about the potential for lawyers to frame and dominate the process, game the system, limit the mediator’s role and control communications–at worst, turning mediation into a mere whistle-stop on the litigation line.”

Professor Stipanowich discusses the different styles and strategies used in mediation (evaluative and facilitative), as well as mediators’ varying approaches to the use of joint sessions and caucuses.

He recognizes that mediation in construction disputes is “likely to occur pursuant to a provision in a multi-phased dispute resolution procedure that begins with some form of job-based initial procedure and culminates in some kind of adjudication…” He raises the point that “the linear arrangement of elements in multi-stage dispute resolution templates does not take account of the reality that dispute resolution is very often ‘non-linear.’”

Professor Stipanowich notes, that

[o]ver the years, there have been efforts to “think outside the box” of the linear framework of stepped dispute resolution by exploiting its potentialities in different ways. For example, it has been suggested that mediators be equipped with a wider variety of tools to break impasse at early stages of conflict (such as a more nuanced appreciation of cognitive factors affecting negotiations). They may also facilitate the parties’ focus on key factual issues and related, limited information exchange or targeted binding or nonbinding decisions by judges or arbitrators that could lay the groundwork for resolution of conflict. Even where substantive issues cannot be resolved in mediation, mediators may nevertheless focus on facilitating agreements regarding dispute resolution process elements and helping parties to set the stage for arbitration proceedings with features that are effectively tailored to the issues at hand.

Lastly Professor Stipanowich discusses the evolution of arbitration in the construction industry, namely, the decline in domestic construction arbitration. He notes,

Significant reductions in the number of mediations and arbitrations reflect the impact of the Great Recession, the worst economic downturn since the Great Depression, on activity in the construction sector. However, while the number of mediations decreased by about one-third between 2008 and 2013, the arbitration caseload dropped by an even greater proportion (around 43%). One reason for the disparity may be the very fact that increased use of mediation has lessened the demand for arbitration by producing more early settlements. Or perhaps some attorneys believe that many of the benefits traditionally sought from arbitration, including efficiency, expedition, privacy and business-oriented results, are more effectively achieved in mediation. But neither of these explanations fully explains why, a mere decade after the debut of a mediation stage in the American Institute of Architects documents, the drafters elected to remove arbitration as the default process for binding adjudication. Moreover, when results from a 2011 survey of corporate counsel in major corporations are compared with data from a similar survey in 1997, there is a decided decline in the number of companies currently using arbitration for commercial disputes; also, fewer corporate counsel are expecting their companies to use arbitration for commercial disputes in the future. The question is, why would arbitration, which for so long was synonymous with dispute resolution in the construction industry, be perceived as inferior, and not superior, to litigation as a means of adjudication?

Professor Stipanowich also addresses the drift of arbitration towards a litigation model, the responses to concerns about increasing cost and delay, the demise of the multi-disciplinary arbitration tribunal, the application of the law and other standards in decision making in arbitration, whether party-appointed arbitrators are independent, partisan or “predisposed,” the professional crunch as more and more construction lawyers serve as arbitrators in their retirement, and lastly the use of arbitration to resolve disputes in international construction projects.

Stay tuned for the summary of part III of Managing Construction Conflict: Unfinished Revolution, Continuing Evolution!

Read the summary of part I

Read the summary of part III

For more information, please read Professor Stipanowich’s full article.