Originally from: AAA Handbook on Construction Arbitration and ADR - 2nd Edition

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I. Introduction

The Construction Industry Institute (CII) has concluded that “the U.S. construction industry is ill,” and has complained that “litigation related to design and construction continues to increase.” Engineering-News Record, the weekly magazine of the construction industry, has editorially lamented “the awful litigious nature of this industry.” The Business Roundtable has concluded that the U.S. construction industry is one of the country’s least efficient industries, and blames much of this inefficiency on the “adversarial dance” between the parties to the construction project, which creates “a constant state of confrontation.” It is ironic that the one industry in the country that more than all others depends on coordination, cooperation and teamwork among multiple participants should be the country’s most adversarial industry.

This adversarial attitude is reflected in antagonistic relationships, “win-lose” attitudes and general dissension. Construction disputes and claims have become more common. Lawyers are more involved in disputes and claims. The dispute process is more legalized. There is a tendency to postpone the resolution of many disputes, especially those disputes involving money, until after construction is complete. Unresolved problems that hold up payments create uncertainty as to the outcome and engendered even more adversarial relationships, which cause delays and disruptions to the project. These delays and disruptions adversely affect not only the project completion time, they cause added costs to the project completion time, they cause added costs to the project participants, which in turn breed new claims and disputes in an ever-increasing "spiral of conflict." Massive project-end arbitrations and court cases have become common. The strains in relationships while all these problems accumulate have affected the way projects are constructured. The transaction costs of all of these disputes hae increased geometrically. The costs to the industry in fees paid to lawyers, claims consultants and expert witnesses, and in the lost time of the parties themselves are incalculable.1