Construction Industry Alternative Dispute Resolution: Six Reasons ADR May Be Right For Your Next Construction Project
Additionally published at https://www.faegrebd.com/onconstructionlaw
For over a century, the American construction industry has promoted the use of non-judicial dispute resolution methods. Construction industry participants and “insiders” know how construction projects are delivered and have the in-depth knowledge required to understand and successfully resolve disputes. Below are six generally accepted perceptions in the construction industry that commend ADR as more suitable than litigation.
First, construction is technologically complex. Construction comprises a host of applied sciences such as architecture, engineering, principles of construction, and construction management. Construction’s technological complexity is amplified by its uniqueness—projects are unique, built by a unique aggregation of companies, where productivity is affected by weather, geology, local labor skill and availability, local building codes, and site accessibility.
Second, construction is the largest segment of the production sector of the U.S. economy. The industry comprises millions of companies that employ many millions of people. The size and complexity of the construction industry produces numerous complex construction disputes.
Third, because of construction’s technological complexity, size, and uniqueness, American law governing the construction industry has become incredibly complex—a separate breed of animal. Construction law heavily relies on industry experience, custom and usage, specialized language, implied duties, and unique concepts of risk allocation perceived as invoking the “law of the shop” more frequently than the “law of the court.” Industry insiders, their counsel, and third-party neutrals understand construction’s unique nature and apply that knowledge throughout the ADR process.
Fourth, construction disputes rely heavily upon opinion testimony from experts, trained in the nuances and complexities of their particular field. This aspect of construction disputes can be frustrating and confusing to jurors. Therefore, ADR conducted by those knowledgeable in industry customs and practices is viewed as the superior option to submitting a dispute to a courtroom determination.
Fifth, ADR is amenable to maintaining important business and personal relationships. It has been said that ADR effectively blurs the distinction between victor and vanquished, so that the parties can continue their business and personal relationships within the industry and within the community.
Sixth, juries are made up of members of the local community and sometimes hold views reflecting local prejudices and biases. ADR can place disputes in the hands of independent, impartial neutrals beyond the reach of local bias and prejudice.
This article summarizes content from Bruner & O’Connor on Construction Law. For more information on this topic, or for additional citations, see Section 21:4: Problems with arbitration and new “rapid resolution” alternative dispute resolution initiatives.