The AAA and the construction industry

The complexity of the construction industry cannot be overstated. No other field brings together people and entities of varying skills and professions including contractors, subcontractors, builders, engineers, architects, and other laborers who all interact-either directly or indirectly-with the owner. Because virtually every construction project depends on the participation of many people at varying stages, it is easy to envision how conflicts can arise.

Construction business professionals for some time have taken advantage of the benefits of ADR in creative ways. Arbitration has been a part of the American Institute of Architects' (AIA) standard forms since the turn of the century. Once the American Arbitration Association was established in 1926, the AIA forms were revised to allow parties to arbitrate under the Association's Commercial Arbitration Rules. The construction industry seemed to favor administered arbitration to the ad hoc approach as more effective and, soon after, it concluded that it would be better served if all cases were handled under AAA auspices and according to specialized industry rules.

Arbitration

Occasionally, parties do argue over arbitral jurisdiction-the arbitral subject matter-and seek to bring this issue before a court of law. For this reason, it is recommended that parties clearly indicate in their arbitration agreement the administering institution (if any) and the applicable procedures. The AAA suggests parties insert an arbitration clause into their international construction contracts to avoid wasteful litigation. As for international cases, parties might also consider providing for the locale, language, composition and qualifications of the arbitral tribunal, as well as the governing law.

Mediation

Mediation provides the parties with greater control over the outcome. Significantly, the mediator is not authorized to impose a settlement, but can guide the parties toward achieving their own settlement. The average rate of settlement in several studies is in the 85%-plus category. I would note that selection of the mediator is of critical importance to the success of the process. Important considerations are the training, experience, and professional qualifications of the mediator. The AAA has undertaken a significant effort to provide a panel of neutrals of only the highest quality professionals.

Partnering

Partnering, also known as "cooperative contracting," first originated in the construction industry during the 1980s as a way of reducing the costs of lengthy and complex litigation and arbitration, by eliminating or minimizing issues that otherwise would become legal disputes. It has been described as a "formal process for building teamwork among the owner, contractor, designer, subcontractors, and others." Partnering can be considered a form of risk management, in which "all of the many disciplines involved in a project work together in a non-adversarial workshop format to develop an interdisciplinary vision and to build a communications methodology that balances the strengths of the project against its own weaknesses."

Dispute Review Boards

A Dispute Review Board (DRB) is typically a three-person panel of impartial "neutrals," generally established at the outset of a construction project to resolve conflicts as they arise. For smaller projects, a one-person DRB could be established. Ideally, the DRB would meet regulady. This helps the DRB to stay fully informed of the project and its progress so that it would be able to focus quickly on a disputed issue without wasting too much learning of the project's history. The DRB hearing is usually informal. Parties could agree in advance that the DRB has the authority to simply make recommendations or render binding decisions.

AAA Roster

The AAA has established and continues to maintain as members of its Roster of Neutrals individuals competent to hear and determine disputes administered under its Construction Rules. Among other methods, the Association considers for appointment to the construction industry roster persons recommended by Regional Roster Advisory Committees by virtue of their experience in the construction field. Because the AAA is committed to providing the finest neutrals who are both qualified and trained, it now has two departments devoted precisely to these necessary objectives: the Department of Neutral Relations and the Department of Education. Additionally, the AAA is in the midst of creating an international Roster of Dispute Review Board Members to consist of individuals with considerable project experience and expertise.

Holistic ADR System

The AAA is focusing on "project solutions." The primary goal is to move a dispute back in time and to create a "menu" of dispute avoidance and dispute resolution options from which to choose at the outset of a project. To achieve this goal, the AAA is working to develop a whole-project ADR system that would utilize the wealth of AAA administrative and other resources including partnering, conflict management skills training for key project staff, site-based systems (DRBs and project neutrals) and classic post-project mediation and/or arbitration. The AAA is working consultatively with key project staff to create a holistic dispute avoidance and conflict resolution system.

AAA and the Public Sector

For approximately 10 years, the Connecticut Department of Transportation has been using arbitration and mediation in accordance with a statute that gives contractors a right to arbitrate their claims and allows for mediation. The statute indicates that AAA arbitration rules will be applied unless the parties agree to another entity with another set of rules.

Colorado's Department of Transportation recently replaced its claim review board with advisory arbitration. Claims involving less than $20,000 are determined by the chief engineer. For larger claims, the specifications allow both the contractor and the chief engineer to request advisory arbitration administered by an independent arbitration organization such as the AAA to aid in the determination of the claim. The AAA modified its rules to accommodate the unique needs of the Colorado DOT under the specifications.

With the AAA, New York City established a dispute resolution program to resolve conflicts involving construction on its roads. Any disputes between the utility company and the contractors repairing city roads that concern only the "value of interruption" will be submitted to "last-best offer" arbitration.