1. Introduction to Construction Dispute Resolution Feniosky Peña-Mora Gilbert W.Winslow Career Development Associate Professor of Information Technology and Project Management MIT Room 1-253, Phone (617)253-7142, Fax (617)253-6324 Email:feniosky@mit.edu Intelligent Engineering Systems Laboratory Center for Construction and Research Education Department of Civil and Environmental Engineering Massachusetts Institute of Technology Stage 6: Court Alternatives and Litigation

2. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 2 Definitions WHAT Litigation, the Final Step in Dispute Resolution Ladder No Control Over the Outcome (Win-Lose Outcome) Awards Based on Monetary Compensation Solid Discovery and Effective Presentation WHO Outside Third Party: Experts in the Field, Retired Judges, Lawyers Lawyers, Judge and/or Jury Expert Witnesses WHY Cost and Time of Litigation, Drivers for Implementation of DART HOW Review the Facts From Both Sides Evaluate Both Side’s Positions, Strengths and Weaknesses Prepare Effective Presentation

3. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 3 Hospital Heating Plant Project Upgrade of a Hospital Heating Plant in the Western United States Project Awarded by the Federal Government Agency to the Lowest Bidder (DBB Approach) Project Cost: US$45million-Final Completion Before Winter Season Contractor’s Head Office Located in the Northeastern United States- Installation of His Staff On-Site During the Whole Construction Period

4. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 4 Case Study: Problematic Ambiguities in the Scope of the Work Leading to Negotiations Between Owner and Contractor Refusal of the Owner to Reveal How Liquidated Damages Related to Such Problems Were Assessed Based on Schedule Little Oversight of the Project From the Head Office  Inefficient Step negotiations Personality Conflicts Between On-site Representatives  Conflict Escalation Evolution of Negotiations as provided in the Federal Contract: Step Negotiations, Binding Mini- Trial, Federal Court Litigation

5. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 5 Case Study: Important Issues Both Parties Do Not Want to Reach Litigation. There is No Definitive Right and Wrong. How Might a Solid Understanding of the Facts Help Resolve This Dispute? What Effect Does the Personality Conflict Have on the Dispute? What Other Reasons Might Have Caused the Negotiations to Fail?

6. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 6 Outline  The Final Step Discovery of Situation Effective Presentation Court Appointed Experts Judge Pro-Tem Trial by Reference (Referee)

7. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 7 The Final Step Litigation As the Last Stage in the Dispute Resolution Ladder and not a Dispute Resolution Technique Win/Lose Outcome Limited Flexibility Resources and Time Consuming Many Points Should Be Considered Before Litigation Thorough Discovery of the Situation Enough Evidence to Support the Claim Resources Available for Trial Court System Attorney Selection Bench Trial or Jury Trial Trial Duration and Impact Similar Cases Other Options

8. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 8 Outline The Final Step  Discovery of Situation Effective Presentation Court Appointed Experts Judge Pro-Tem Trial by Reference (Referee)

9. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 9 Discovery of Situation More Information Uncovered Prior to Litigation  Complete Understanding of the Facts  Solid Discovery of the Dispute  Possibility of Dispute Resolution Methods of Discovery Thorough Review of the Contract Requests for Documents (Daily Logs, Personal Project Diaries Questioning Participants Written Accounts and Depositions Site Investigations and Testing Reference to Escrow Bid Documents

10. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 10 Outline The Final Step Discovery of Situation  Effective Presentation Court Appointed Experts Judge Pro-Tem Trial by Reference (Referee)

11. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 11 Effective Presentation Ability to Present the Facts in a Logical, Timely and Persuasive Manner at Different Stages At the Beginning: In the Written Notice of Claim Submitted to Owner Courtesy Letter From Owner to Contractor if Delayed Response In Progress Meetings, Upon Receipts of major Claims Expert Testimony in Court

12. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 12 Outline The Final Step Discovery of Situation Effective Presentation  Court Appointed Experts Judge Pro-Tem Trial by Reference (Referee)

13. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 13 Court Appointed Experts Qualified and Expert Witness Appointed By the Court to Substitute the Judge Step 1: Definition of the Issues Requiring Expert Testimony Step 2: Cost Sharing Plan to Cover Expenses Step 3: Experts Selection

14. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 14 Pros and Cons Pros Cost Savings: Two Parties Sharing the Expenses of One Expert Testimony Per Issue Reduction of Hearings Duration Cons Failure of the Judge to Select the Best Expert From the Suggested Ones Heavy Dependence on a Single Testimony Variation to the Approach: Assistance of an Expert Impartial Attorney Benefits –Parties Learning About Their Cause Prior to Trial –Less Expensive Than Full Discovery Proceedings and Pre-hearing Motions –Information Kept Confidential

15. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 15 Outline The Final Step Discovery of Situation Effective Presentation Court Appointed Experts  Judge Pro-Tem Trial by Reference (Referee)

16. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 16 Judge Pro-Tem Appointment of a Temporary Judge, Independent of Court Schedule, With All the Power of a Presiding Judge Pros: Faster Proceedings an More Flexible Schedule Cons: The Need to Give Up the Right to a Jury Trial in Case of Disagreements With the Award By the Temporary Judge

17. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 17 Outline The Final Step Discovery of Situation Effective Presentation Court Appointed Experts Judge Pro-Tem  Trial by Reference (Referee)

18. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 18 Trial By Reference The Referee Being a Neutral Expert Appointment by the Court Authority and Rules of Procedure Set by the Court Legal and Technical Investigation Binding Report (Possibility of Appellation) Fast Procedure and Privacy During Discovery Cons: High Trial Costs Provisional Decision in Case of Appellation or Re-Trials Example:The Court of the Official Referee in the UK and the Judge-Driven DART Revolution

19. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 19 Outline The Final Step Discovery of Situation Effective Presentation Court Appointed Experts Judge Pro-Tem Trial by Reference (Referee)

20. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 20 Hospital Heating Plant Project No Solid Discovery of the Facts Refusal of the Owner to Explain the Derivation of Liquidated Damages Failure of On-site Negotiation Due to Personality Conflicts Ineffective Contractor’s Presentation Joint Selection of the Experts Unorthodox Mini-Trials Experts Meeting With Parties Before Trial Negotiation Between Experts Elimination of Personality Conflicts Solid Discovery of the Facts Professional Presentation of the Material Opportunity for a Win/win Situation

21. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 21 Summary Litigation, the Final Stage in the DRL Importance of Solid Discovery of the Situation and Effective Presentation Procedures to Overcome the Challenges of Litigation by “Forced” Communication Court Appointed Experts Judge Pro-Tem Trial by Reference

22. Introduction to Construction Dispute Resolution Chapter9:Stage 6:Court Alternatives and Litigation © Peña-Mora, et. al. 2002 22 References [Coates, 1997] : Coates, Tom, (1997). ADR is (not) for Wimps. International Commercial Litigation, Vol. 17 pp. 46-48. March, London. Euromoney Institutional Investor PLC. 1997. [ENR, 2/15/1999] : Engineering News Record. Lightening up Litigiousness. McGraw-Hill, New York. Vol.242 (7) p. 68 February 15, 1999. [Findley, 1997] : Findley, Douglas. Construction Claims Preparation Under ADR. 1997 AACE International Transactions C&C.01.1-C&C.01.4. 1997. [Gould, et al.,1998] : Gould, Nicholas and Cohen, Michael. ADR: Appropriate Dispute Resolution in the U.K. Construction Industry. Sweet & Maxwell, London. Vol. 17. April 1998. [Latham, 1994] : Latham, M. Constructing the Team: Final report of the Government/Industry Review of Procurement and Contractual Arrangements in the UK Construction Industry. HMSO London. 1994. [Murdoch et al., 1992] : Murdoch, J and Hughes, W. Constuction Contracts: Law and Management. E & FN Spon. p 372. 1992. [Peña-Mora et al, 2002] : Peña-Mora, F., Sosa, C., and McCone, S. Introduction to Construction Dispute Resolution. Prentice Hall, New Jersey, 2002. [Treacy, 1995] : Treacy, Thomas B., (1995). Use of ADR in the Construction Industry. Journal of Management in Engineering Vol. 11 (1) pp. 58-63. January/February, 1995. [Zack b, 1997] : Zack, James G., (1997). Resolution of Disputes: The Next Generation. AACE Transactions. pp. 50-54.