How does incorporating dispute resolution into a contract along with procedures to encourage transparency and collaboration among parties help
when an issue arises?

Bryan Thomas
Partner
Bradley Arant Boult Cummings LLP
Dispute provisions should be designed to encourage transparency and collaboration. In my 17 years advising on construction projects and litigating those that cannot be reasonably resolved, I have observed that those that
reach the courtroom or an arbitration panel remain unresolved because of the dispute process, the associated costs and the related leverage provided by the contractual structure of the process. My advice on the front-end is twofold: have a useful mediation provision and develop a practical fee-shifting provision to encourage real exchanges and resolution. While early non-binding dispute procedures, like DRBs, can be helpful on the largest of projects, an early mediation requirement is more practical and helpful for most projects. The key is making sure all parties are encouraged to meaningfully participate in the mediation. Thus, linking a mediation requirement with a carefully crafted fee-shifting provision can encourage mutual engagement, drive transparency and collaboration throughout the process, and ultimately lead to resolution rather than incurring the significant costs associated with fighting in the dispute process. My recommendation is to develop a fee provision that objectively requires the parties to set their own binding bar for determining the “prevailing party.” That can be achieved through the required exchange of early written offers “X” days after (or before) mediation, trial or both. Nothing can be more sobering to all parties than considering the possibility of having to pay both parties’ legal fees. Not surprisingly, most contracts that incorporate this approach result in the transparency needed for efficient and early resolution.

Reprinted courtesy of Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.