Originally from the American Journal of Construction Arbitration & ADR

When a construction project goes to hell, the budget is badly busted, the unexpected costs soar, substantial delays and impacts occur, and the parties’ relationships deteriorate.  The result is often a myriad of claims between the parties for extra work, differing site conditions, over-inspection, defective design, defective work, delay damages, breach of the duty of good faith and fair dealing, and many other claims and causes of action (referred to herein as the “300 Claim Dispute” ). Once the efforts to negotiate and mediate the 300 Claim Dispute are exhausted at the project level, the parties must decide how to proceed through the disputes process in as cost-effective a manner as possible.

The rigidity of formal judicial litigation makes it very difficult to achieve an efficient result on the 300 Claim Dispute in court.  The court’s rules are designed for a more standard or typical contract dispute, not one with the level of complexity, facts, and unique terms that one sees in the 300 Claim Dispute.  Arbitration at least provides the parties with the flexibility to design a process that allows them to achieve some efficiency in resolving the disputes, particularly if they select the right arbitrator.   This article provides guidance to both the parties and the arbitrators on how to arbitrate the 300 Claim Dispute in the most cost-effective manner.

I.   THE PREHEARING

A.   Who Designs the Process and When Is It Done?

The optimum method to design an efficient process to arbitrate, whether one claim or 300 claims, is for counsel to meet and confer as early as possible to develop a process for the arbitration that best suits the nature of the dispute and the parties.  In designing the process, the parties should consider many factors including, but not limited to: whether the dispute is factually or legally driven, whether the dispute is document intensive or not, whether the hearing will require multiple witnesses or a limited number of witnesses, whether extensive expert testimony will be required, whether extensive discovery will be required, the sophistication of the parties and their counsel, the degree of trust and working relationship between counsel, and the arbitrator selected to hear the disputes.