Five Steps: To Resolving Construction Disputes Without Litigation.

• Author: Steen, Richard H.

Disputes are a reality in every construction project Minor issues can fester and grow into serious disputes, with crippling consequences for parties to a construction project. The rising cost, delay and risk of litigating construction disputes has prompted (he construction industry to look for new and more efficient ways to resolve these disputes outside of the courtroom.

Within the past decade, the industry has taken steps to avoid litigation and control disputes by employing various mechanisms that can be used during nearly any stage of a construction project. These mechanisms range from simple negotiation to binding Alternative Dispute Resolution (ADR) techniques.

While they vary, each of the mechanisms is based upon two basic tenets: resolution sooner rather than later, and resolution that is less confrontational. "Waiting out" a dispute inevitably makes it harder to resolve. Also parties involved in a construction or any other commercial dispute usually prefer to retain control over the outcome, and want to maintain a good business relationship with the other parties.

There are five key steps to resolving construction disputes without litigation. The first and second steps involve the contract: contractual language that equitably allocates responsibilities and liabilities, and contract provisions that delineate procedures for dealing with contractual disputes.

The third step involves team building and establishing common goals and objectives. The fourth and fifth steps involve providing for access to a neutral forum to resolve disputes throughout the life of a project and, ultimately, a binding procedure as a last resort.

Step 1: Allocating Risk

To the extent that they are able, parties to a contract often include contract language designed to shift risk to the other party, so that the basis for claims and disputes is eliminated. For example, inserting a "no damage for delay" clause in a construction contract may effectively prevent a contractor from recovering additional costs caused by unexpected delays. Similarly, contracts can be designed so that submitting a valid claim is nearly impossible, thus actually encouraging litigation.

Such contract provisions, however, do not prevent disputes from occurring. Often, they only create fractious relationships among the parties involved in the project.

Also, inequitable risk shifting can result in a party having to spend more time looking for ways to minimize its liability on the project, usually to the detriment of the project itself. As the costs and risks of construction continues to rise, more construction industry professionals are...