According to an adage in the construction industry, if you are a regular participant in construction projects, it is not a matter of “if” you will become embroiled in a construction dispute; it is only a matter of “when” that dispute will come. That cynical comment that may or may not be true, however, it is a fact that disputes are a common occurrence and ever-present risk in construction. Consequently, industry participants must be prepared to responsibly address and deal with disputes, the sooner the better and without formal legal proceeding if practical.
This article discusses the use of a neutral evaluator to provide an independent assessment of an issue, claim or dispute before the parties incur the substantial costs of preparing for and engaging in costly formal dispute resolution processes such as litigation or arbitration. The neutral evaluator can be employed by some or all the parties to the dispute as an aid to negotiation; a party can also use neutral evaluation individually, whether claimant or defendant, to get independent guidance on the strength or weakness of their position in the dispute before committing to a long and costly dispute process. When faced with a material construction dispute, a vested party must consider how to resolve such dispute. Generally, the two options are to negotiate a settlement with the other party or parties and move on or pursue some formalized dispute resolution format – such format often being prescribed by the terms of the construction contract for larger projects. Such process entails the initiation of formal processes – mediation, litigation and/or arbitration. See for example, Article 7 of A201-2017 General Conditions of the Contract for Construction, and Article 12 of ConsensusDocs 200 Agreement and General Conditions Between Owner and Constructor (Lump Sum).
If negotiation fails and a more formal dispute resolution process is initiated, the cost of pursuing a resolution escalates dramatically and the stakes for all parties ratchet up. The path such process takes and the duration for ultimation resolution of the dispute is varied and unpredictable. Obviously, the expeditious resolution of the dispute is in all parties best interest, so the purpose of the following discussion is to generate discussion as to whether a neutral evaluation might provide value to one or more parties in the dispute sometime during the dispute resolution process.
Undoubtedly, creative thinking and the unique circumstances of any given dispute might define a wide array of neutral evaluation possibilities. However, the scenarios described below are ones that seem to regularly present opportunities for a neutral evaluation and may serve to begin the evaluation process as to whether a neutral evaluation can assist in resolving a dispute.
Evaluation Prior To Initiating A Claim
The formalization of a claim carries significant consequences, not the least of which is an impact to the relationship between the parties and the potential for creating or increasing friction and hostility in the administrative environment on a project if it is still under construction. Given such ramifications, the claimant might find it prudent to test the strength of their position in advance of filing a claim by having a neutral evaluation performed by an experienced and professionally qualified party. The depth of evaluation can be set by discussion between the stakeholder and the evaluator but should be set for the purpose of testing the merits of the claim and how likely an industry knowledgeable party might respond to the claimant’s entitlement arguments.
How an industry knowledgeable neutral assesses the merits is the appropriate framework for evaluation in anticipation of dispute resolution through commercial negotiations, arbitration before experienced construction arbitrators, and even judges in specialized courts like the US Court of Federal Claims or administrative judges at federal or state boards of contract appeals. On the other hand, how an industry knowledgeable neutral assesses the merits may not be predictive if a jury will decide the dispute or even by a judge with no construction experience.
In the case of this neutral evaluation, it is the author’s opinion that the evaluator should not have any future role in development or pursuit of a claim should it progress forward, and the evaluator should know this in advance. Too many times, a so called “expert” has opined on a claim’s merit with the underlying goal being the capture of an assignment for developing and/or prosecuting a claim going forward. In this situation, whatever evaluation proffered is unlikely to be a true neutral evaluation.