"I'll see you in court!" Those volatile words are not uncommon when conflicts arise on a construction project. But nobody really wants to be in court. There is an alternative - mediation.
Construction projects require contractual interdependence between many parties and frequently the complexity and nature of those relationships lead to conflict. Construction disputes are usually intricate and when they are not resolved, they commonly escalate to legal action involving arbitration or litigation.
By the mid-1980s, it was becoming apparent to many that litigation costs were growing exponentially, and that many disputes that reached the legal arena could have been resolved earlier had the parties communicated their issues to each other clearly in a less combative setting. As with many trends, a few pioneers noted the phenomenon and developed an alternative approach to resolving a dispute-one that could be used with or without the follow-up of litigation. This alternative approach is the modern form of mediation. While this concept of resolving disputes is not new, its formal use in legal matters was not widespread prior to the 1980s. Later in that decade, mediation evolved from a cottage industry serving the legal community into a widely accepted and desired construction dispute resolution technique. Now, mediation is sometimes used by construction and engineering companies to achieve a dispute resolution before taking the costlier, more time-consuming step into the legal arena. The mediation process is particularly useful for those in the construction industry for reasons that will be addressed in this article.
What Is Mediation?
Mediation is a structured negotiation in which a neutral person, the mediator, assists parties in a dispute with the objective of reaching a settlement. While mediators cannot impose a decision, they can influence the parties' receptiveness towards settlement through clarifying the issues and pointing out the strengths and weaknesses of each party's positions. The mediator, being neutral, can be seen by both sides as an ally, and also as the person who keeps alive the process of negotiation and potential settlement. Mediation has become one of the most cost-effective and widely used dispute resolution tactics used by those in the construction industry today.
Why Mediation for Construction Disputes?
During the construction process, unanticipated events or conditions frequently occur, requiring the parties to identify when a substantive change has developed and how to deal with it. Who "owns" the time and how much does labor, equipment, and material really cost? The likelihood that the parties will develop disagreements over these issues is high. To compound this struggle, the construction process involves events and issues that can be highly technical and factually complex. Mediation offers the parties a forum in which they can communicate their respective complex positions both directly and through the mediator without having to fear an adverse result from decision-makers (e.g., jury, judge, panel, and so forth) who may not understand the true nature of the issues. The mediator is thus an individual whose role is to maintain structure and order to the settlement negotiations, providing the parties an opportunity to express their position and opinions. In complex construction-related disputes that arise today, a skilled mediator with experience in construction litigation and mediation can be the key to the successful resolution of the parties' dispute.
The Mediator - A Critical Resource
There are typically two types of mediators: facilitative and evaluative. Either can be effective in reaching a construction dispute resolution, depending on the nature of the dispute and the individuals representing the parties. The facilitative mediator will usually take a neutral stance, summarizing each side's positions with a view towards promoting an environment in which each party's voice can be heard. The mediator will focus on each party's presentation of the facts, providing a calm presence in which the parties can listen to and evaluate their respective positions. The mediator in this case does not typically express his views regarding the merits of the issues on either side. Here, the mediator's role is to assist the parties in communicating information which each party considers important to their positions. The facilitative mediator tries to achieve compromise and settlement through understanding and cooperation.
The evaluative mediator usually has a series of definitive opinions regarding each party's positions, which he discusses to some extent with both sides. After listening separately to each party's perception of the facts and their positions, the mediator develops an evaluation of the merit of certain issues. The mediator will usually present his deductions and conclusions in a nonthreatening manner, hopefully facilitating each party's self-evaluation. However, an evaluative mediator can take an adversarial stance with either or both parties in order to promote compromise of a position, or to neutralize a negative influence on the path towards settlement.
The purpose of both mediator roles is the same: to achieve a resolution of the dispute. Both types of mediators do this by essentially helping the parties better understand each other's issues, simplifying arguments, and developing opinions regarding each side's positions. However, it is the evaluative mediator who will quickly and directly voice opinions on dispute issues and the merits of each side's positions, as well as on the possible outcome should a dispute escalate to arbitration or trial. By doing so, he will be more likely to get the parties' attention, thus helping generate positive results in a construction dispute. The facilitative mediator will tend to focus on looking for opportunities to create harmony and agreement between the parties. The facilitative mediator can be particularly successful in situations where personalities are deeply intertwined with the issues. The facilitative mediator will have a calming effect on the parties, which often results in settlement.
The Mediation Process - Focus on Settlement
The process of mediation is relatively simple. However, most construction disputes involve complex technical issues and damages elements which are not well substantiated. So much so that oftentimes a construction-related mediation will include numerous fact witnesses as well as construction experts who attend and frequently make presentations.
Generally, the mediation format begins with an introduction of the parties, and the mediator gives a brief overview of the process. The parties' attorneys will then make opening statements sometimes including illustrations or charts. Due to the nature and complexity of most construction disputes, experts will also make presentations using illustrations, photographs, and/or computer-generated graphics. In construction mediation, guidelines such as the following can foster positive results:
- Select a mediator experienced in both construction litigation and mediation.
- Prepare an outline of the dispute's issues, so the mediator and all team members can understand each party's positions.
- Prepare for the mediation as you would for a very important negotiation. Preparation should include reviewing key correspondence and legal issues, as well as any expert reports.
- Arm your decision-makers who will be present at the mediation with knowledge. Thus if compromises are to be made-and that will be necessary to actually reach settlement-they can be made with knowledge and understanding.
- Be prepared to make formal presentations outlining the positions and issues to both the mediator and the opposing party. It is prudent for any presentation to address all issues, thereby relieving dependence on the opposing party to present the issues as you would wish.
- Let the mediator guide the process and listen carefully to what he says.
Mediation can be crippled if either side holds on to unrealistic expectations, sometimes manifested in their unwillingness to negotiate reasonably and readiness to compromise in an effort to settle the dispute. When one or both parties fail to clearly communicate issues, positions, and interests-even with the help of the mediator-the process is undermined. In addition, it is important that each party has a representative present empowered with the authority and desire to achieve a compromise settlement.
Mediation can help reestablish a negotiation process when the parties themselves cannot reach a mutually agreeable solution. By introducing a neutral third party familiar with the construction process, the parties to a dispute are often able to restore a positive negotiating stance, which can lead to jointly advantageous solutions. Mediation involving construction disputes is a viable, cost-effective, efficient alternative to arbitration or litigation. The process of mediation, when it results in a settlement, also usually results in both parties feeling that they've won. The reverse is frequently the case in litigation or arbitration.