Reshaping ADR strategies for today's global engineering and construction market.

• Author: Timpane, Michael

In its ongoing effort to strive for an understanding of the sources of disputes, as well as for the most current information as to how disputes are being resolved and could potentially be resolved, JAMS has been conducting a series of Global Engineering & Construction (GEC) Roundtables throughout the country designed to find out directly from construction industry leaders where and why disputes are arising, how they are currently being managed, and how the recent stimulus package might play out in the construction industry. A recent GEC Roundtable was conducted in Northern California attended by the authors as GEC neutrals, JAMS staff, and our seven guests, four representatives of large public entities, and three prominent attorneys representing various "sides" of construction disputes- private owners, public owners, design professionals, and contractors.

A very interactive, open, and thoughtful discussion at the Roundtable revealed the following thoughts and current issues: Starting with opinions about sources of construction disputes, incomplete or inadequate design documents were prominent in the discussion. This was not a "dump on the designer" theme, but rather a more nuanced discussion of why this is so. Owners seem to recognize the principle that there is "no set of perfect drawings," and that design budget constraints exist. Yet each drawing discrepancy can soon become an "error," and each change order requests a reason to question the design. Schedule-driven design, in both private and public settings, was also identified as a problem. Finally, rather than being interested in coordination, the contractor and designer are essentially set against each other and usually have very little interaction pre-bid.

Another source of dispute identified by the public entities is the requirement of accepting the low bidder. A "Catch-22": the owner thinks all change orders or RFI's are being generated because the low bidder "missed" something, because all the other bids were higher. Conversely, the low bidder must have bid with low or nonexistent margins, and will indeed be "looking for" change orders, convinced the owner skimped on design in order to get low bids. Predictably, the private owner representative is aghast that anything would be built this way.

A common observation among the participants was that disputes have a way of emerging in the latter stages of a project. Two reasons for this were identified. First, close-out issues and any...