Early Warnings Lead to Early Resolutions
 - A Boon for the Construction Industry

By Michael L. Lapin, Esq.

Early Warnings Lead to Early Resolutions
 - A Boon for the Construction Industry
By Michael L. Lapin, Esq.

Although the construction industry is no stranger to alternative dispute resolution, mediation or arbitration do not typically take place before the maturation of a conflict –

at a time when the parties have likely been packaged by their attorneys in preparation for tough negotiations or even litigation. Construction disputes can impact project financial costs, working relationships, and construction progress, particularly if the dispute cannot be mediated and winds up in court.

What would be the reaction of the industry if a process came into being that was devised to resolve construction issues before they became “disputes?” And what if this process really worked? And finally, what if the cost of this process were virtually insignificant in relation to the projected project budget?

The process exists, and has since about 1975. It is usually called a Dispute Resolution Board (DRB), also referred to by some as an Issue Review Board (IRB). This board is customarily a panel of three experienced people agreed upon by the owner and general contractor at the inception of a project. The DRB meets regularly to hear issues when they arise and to make recommendations as to their solutions. Panel members are knowledgeable in the particular industry at hand and therefore can utilize their expertise to find creative solutions. Additionally, panel members bring a neutral and objective perspective to the projects, and provide all parties with a forum to present their side of the issue.

The real value of the DRB process is in providing a mechanism that allows issues to be dealt with immediately, before they have a chance to escalate. Constructive solutions that benefit all parties can frequently be crafted. In addition the DRB does not displace other dispute resolution methods; therefore, if the recommendations are not to the liking of the parties, options such as arbitration or litigation may still be pursued. The contract documents usually specify that the use of a DRB is a precondition to initiating a binding dispute resolution process, such as arbitration or litigation.

A survey conducted in September 2003 by the Dispute Review Board Foundation (Seattle, WA) showed that Dispute Review Boards were used in all types of construction projects, from tunneling and underground to highway and hi-rise. The survey included 1057 projects totaling $77.7 billion in construction costs. Of these projects, 1285 formal recommendations were issued with only 28 recommendations taken beyond the DRB process – a success rate of 97.8! Looking at the other side of the coin, only 2.18% of the DRB formal recommendations were not accepted by the parties.

Kathleen M.J. Harmon is the president of Harmon/York Associates, a 20-year old construction consulting firm located in Secaucus, New Jersey. Ms. Harmon has written a number of informative articles about Dispute Resolution Board process. I am pleased to have her consent to reproduce in my newsletter Truce is Better than Friction extracts from an article she wrote that was published in the Nov. 2003-Jan. 2004 issue of the Dispute Resolution Journal of the American Arbitration Association. The first part of the article will be reproduced in the next issue of this newsletter, with final portions following in subsequent issues.

The Institute for Conflict Management (ICM) is a Santa Monica-headquartered service provider of certified dispute review board panelists. As a member of the ICM Advisory Board, I invite you to visit the ICM page on my website as well as the ICM website: www.icmneutrals.com. There you will find a discussion as to the practical considerations involved in selecting panelists for a dispute resolution board, and how ICM provides for such panelists as well as undertakes the complicated administrative record keeping that is part of this process. Please feel free to contact ICM (310-356-6970) or me (714-371-4111) for additional information regarding the establishment of a Dispute Resolution Board, including panelist profiles, contract forms and cost estimates.

Michael L. Lapin, a member of the bars of California and Illinois for over thirty-five years, is a full-time mediator, serving the real estate and business communities. He has owned/managed as general partner 1.5 million square feet of retail/commercial property, overseeing development, leasing, financial and operational management. He is also a licensed real estate broker.

A twelve-year member of the Orange County Airport Commission (twice chairman) and three-year member of the Orange County Public Finance Advisory Committee (chairman), he was retained by the County of Orange during 1999-2000 in a consultant capacity of Program Manager of the Orange County MCAS El Toro Master Development Program, administering a $10 million annual budget.

In the course of a professional career spanning the practice of law, real estate development and public service, Mr. Lapin has negotiated and resolved hundreds of disputes. More information about him may be found at www.lapinmediation.com or by emailing him directly at: mlapin@lapinmediation.com