What are the steps to selecting the best dispute resolution method for a construction project?

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Disputes and claims are inevitable in any construction project, but they can be costly, time-consuming, and damaging to the relationships between the parties involved. Therefore, it is important to select the best dispute resolution method that suits the nature, complexity, and severity of the conflict. In this article, you will learn the steps to choosing the most appropriate and effective way to resolve your construction disputes and claims.

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1 Identify the issues

The first step is to identify the issues that are causing the dispute or claim. You need to understand the root causes, the interests, and the positions of each party, as well as the contractual obligations, legal rights, and risks involved. You should also gather and review all the relevant documents, evidence, and correspondence that support your case or refute the other party's claims. Identifying the issues will help you narrow down the scope and magnitude of the dispute or claim, and prepare you for the next steps.

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Pablo del Cid Fratti

Ingeniero CIvil / Máster en Estructuras / Máster en Dirección de Proyectos / Consultor Ambiental
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Los métodos de resolución de disputas en proyectos de construcción deben de quedar claramente establecidos en el contrato relacionado a la obra. Este mismo contrato deberá contener los mecanismos, casos y metodología para iniciar con la solución de disputas. Esto permitirá, tener claro, desde un inicio como semanejarán estas disputas, los mecanismos de solucióm y los compromisos y obligaciones de cada unad las partes.

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2 Communicate with the other party

The second step is to communicate with the other party in a respectful, professional, and constructive manner. You should try to establish a dialogue and a rapport with them, and express your willingness to resolve the dispute or claim amicably. You should also listen to their concerns, perspectives, and expectations, and try to find common ground and mutual benefits. Communicating with the other party will help you understand their position and motivation, and explore possible solutions and alternatives.

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3 Evaluate the options

The third step is to evaluate the options for resolving the dispute or claim. You should consider the advantages and disadvantages of each option, such as the cost, time, outcome, enforceability, confidentiality, and impact on the relationship. You should also assess the likelihood and consequences of each option, such as the chances of success, the risks of escalation, the damages or remedies, and the reputation or goodwill. Evaluating the options will help you weigh the pros and cons of each option, and determine the best course of action.

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4 Negotiate a settlement

The fourth step is to negotiate a settlement with the other party. You should approach the negotiation with a cooperative and flexible attitude, and focus on the interests and needs of both parties, rather than the positions and demands. You should also use objective criteria and standards, such as industry norms, market rates, or expert opinions, to support your arguments and proposals. You should also be prepared to make concessions and trade-offs, as long as they are reasonable and fair. Negotiating a settlement will help you reach a mutually acceptable and beneficial agreement, and avoid further litigation or arbitration.

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Juan Carlos Medina Flores

Abogado, árbitro y adjudicador | Infraestructura | Dispute Boards / JRD | NEC y FIDIC | Contratación Pública | Arbitraje | Contratos de Gobierno a Gobierno (G2G) | Derecho administrativo.
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Incluso luego de escalada la reclamación al mecanismo de solución de controversias pactado, es recomendable mantener la comunicación con la otra parte para buscar una decisión consensuada que ahorre los costos y tiempo. Muchas veces las partes, en mecanismos como el arbitraje, pese a ganar, por lo inoportuna de la decisión o el desgaste de la relación, terminan sintiéndose insatisfechas.

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5 Seek third-party assistance

The fifth step is to seek third-party assistance if you cannot reach a settlement with the other party. You should decide whether you want to use a non-binding or a binding method of dispute resolution, such as mediation, adjudication, or arbitration. You should also select a qualified and impartial third-party, such as a mediator, an adjudicator, or an arbitrator, who has the expertise and experience in handling construction disputes and claims. You should also follow the rules and procedures of the chosen method, and respect the decision or recommendation of the third-party. Seeking third-party assistance will help you resolve the dispute or claim in a more formal and authoritative way, but it may also entail more cost, time, and complexity.

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Trent Cotney

Partner and Construction Team Leader at Adams & Reese, LLP; NRCA, CRCA, WSRCA, FRSA, IRCA, RCASC, RCAW, TARC, NTRCA, URCA, RT3, ERA, and NSA General Counsel
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I recommend the Initial Decision Maker process in AIA contracts. By selecting a third party to quickly review disputes, you may be able to avoid costly litigation or arbitration.

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6 Implement the resolution

The sixth step is to implement the resolution of the dispute or claim. You should comply with the terms and conditions of the settlement agreement, or the decision or award of the third-party. You should also document and communicate the resolution to all the relevant parties, such as the contractors, subcontractors, suppliers, or consultants. You should also monitor and verify the performance and delivery of the resolution, and address any issues or disputes that may arise during the implementation. Implementing the resolution will help you finalize and close the dispute or claim, and restore or maintain the relationship with the other party.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Bokang Sithole Pr.Eng, MBA

Professional Engineer | Candidate Pr.CPM | MBA | BSc Bioresources Eng | PGD Project Management | Btech Civil Eng - Water | Golden Key Member | MSAICE | SAICE Durban FLP Chairperson
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It’s always best to avoid adversarial methods and rather opt for negotiation or mediation to reach an amicable resolution without escalating the dispute. You should assess the project complexity, size, and potential risks to determine suitable dispute resolution options and review the project contract to identify any clauses specifying dispute resolution procedures.

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Farzad Nasiri,PMP, PrinceII

Project Manager / Advisor
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To solve the dispute in the projects, first of all, the root of the problem must be searched and investigated. Sometimes there is no dispute at all, it is all misunderstandings and rumors. Therefore, we identify the problem with patience and without rushing. The next step is to organize a meeting. and negotiating with the team and, if necessary, with the stakeholders of the project. In that meeting, we will listen carefully and try to clarify the problems. It is possible that the meeting will be held several times, but at the end of all meetings, we will make a decision and resolve the dispute.

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What are the steps to selecting the best dispute resolution method for a construction project?

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1 Identify the issues

2 Communicate with the other party

3 Evaluate the options

4 Negotiate a settlement

5 Seek third-party assistance

6 Implement the resolution

7 Here’s what else to consider

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