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By Sonny Jester
From the September 2007 issue of Today’s Facility Manager
Experienced facility professionals can often sense when a problem is developing on a project before it escalates into claims alitigation. Anticipating a problem based on the warning signs (1) can lead to early intervention, thus improving the chance of resolving disagreements and allowing the completion of the project in a timely and efficient manner. Two viable mechanisms for such mid-project interventions are the use of a neutral expert and a construction emergency response team (CERT).
A neutral expert is a person or team of construction professionals, frequently designated in the contract, charged with evaluating differences or disputes between an owner and contractor (or a contractor and his/her subcontractors). The neutral expert facilitates communication and a determination of what is right and what is best for the project without taking sides. Costs of the process are borne equally by the parties in disagreement.
The neutral expert steps in when the approval or review process has run its course, and a disagreement over the result looms on the horizon. Neutral experts can assess change order requests and requests for extensions and suggest whether the requesting party has a legitimate complaint, whether the request is overstated, and what is the most efficient and fair remedy for the problem. The neutral expert can assess threats to the critical path perceived by the owner or facility manager and determine not just the legitimacy and true cause of the threat, but can suggest the most expeditious means of restoring the schedule to meet the completion date.
The neutral expert’s most important role is to provide a means of maintaining constructive communication between the parties. By doing so, the parties can avoid posturing that can accompany issues and may escalate into claims.
By providing an industry savvy professional without a “dog in the fight,” the neutral expert process can bring credibility and imagination to avoid escalating the dispute, thus resolving problems at the core of the disagreement. It provides, in effect, an early, informal mediation of the potential dispute.
This process can be established in the contract. The facility manager or general contractor (GC) should designate a neutral expert to address mid-stream problems or disagreements. That designation should be adopted in the GC’s trade contracts on down through the tiers of subcontractors working on the job.
The neutral expert concept presupposes that the parties in the disagreement are still cooperating for the good of the project. In situations where the parties have become polarized, or one side has brought in an outside consultant to “evaluate” the performance of the other, a more partisan approach may be needed to ensure a successful mid-project intervention. The CERT can provide immediate assistance—a type of development or construction triage—in the form of information and options to address the potential threat to the project.
Much like the neutral expert, the CERT must be composed of knowledgeable industry professionals in order to be effective. The team must be in a position to assess the situation quickly and accurately, and to offer analysis and recommendations. The CERT must fairly evaluate the merits of the position taken by the team’s client and provide a real world assessment of strengths and weaknesses. Remember, the goal is to move quickly to resolution and keep the project on track for timely and on-budget completion.
The CERT gives the client a resource to involve in meetings and negotiations that adds substance to the positions asserted. The knowledge and education that a CERT can provide to the client creates an environment for an informed decision to resolve the mid-project problem.
Recent trends in dispute resolution include the appearance of attorney/expert consortiums to advise parties on ways to pursue claims against owners, designers, and builders of large commercial projects (2). The use of CERTs can be an effective counter to the “armed and ready” claimant.
If used at the mid-project stage, the CERT can even help avoid potential litigation. While it anticipates a more adversarial situation than the neutral expert, the CERT offers the benefit of making sure both parties at the table are playing on a level field.
If the goal is the successful completion of the project, as opposed to preparing for litigation, innovative ways of resolving mid-project differences must be explored. These two methods offer the prospect of a solution jointly developed by the parties for the good of the project.
There are other time tested means of addressing claims and litigation. It is not unusual for construction related contracts to stipulate a dispute resolution process. Rather than providing only a mechanism for determining who bears the financial responsibility when the difficulty escalates, the mid-project intervention offers a process that encourages open communication. Both the neutral expert and the CERT, positioned in mid-project, can facilitate the type of discussion or negotiation that can lead to resolution of differences. Such a process will be in the best interests of both parties and the project.
(1) Don Boyken, “Ten Warning Signs a Project is in Trouble,” Boyken Developments Newsletter, Fall 2004.
(2) G. William Quatman, “‘Condo-Mania’ Has Its Risks,” Under Construction, The Newsletter of the ABA Forum on the Construction Industry, March 2006.
There will be costs associated with this proposed process. A valid concern may be whether the expenses of such a service would be cost efficient additions to the project.
If the neutral expert or CERT procedure allows the parties to avoid the expenses of arbitration or litigation, then the costs of the interim expert(s) will be money well spent. If the process allows for the timely and efficient completion of the job, then it almost certainly is cost-effective.
These mechanisms will not eliminate all disputes, claims, or lawsuits arising from construction projects. However, they may reduce the number of those disputes that threaten the successful conclusion of the project and minimize the expenses of dealing with the aftermath.
Jester, vice president, dispute resolution and expert services for Boyken International, directs the company’s client development and education.