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 Class Summary

2. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 2 The Construction Industry Conflict in the Construction Industry Is Inherent of the Characteristics of the Industry. Project Uncertainties and Sub-optimal Contractual Relationships Are a Major Source of Conflict (LNGT Project) Legal Costs of Dispute Resolution Constitute a Burden for the Industry. Dispute Avoidance and Resolution Techniques Should Be Implemented to Resolve Conflicts With Time and Cost Savings.

3. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 3 Evolution Of DART DETERMINATION BY DESIGN PROFESSIONAL BINDING ARBITRATION LITIGATION Negotiations PARTNERING PREVENTION NEGOTIATION STANDING NEUTRAL NONBINDING BINDING LITIGATION Conflict Management Plan

4. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 4 Evolution Of DART The Traditional Two-step Resolution Ladder Stems From Ancestral Dispute Resolution Forms. The Traditional Model Did Not Allow an Efficient Dispute Resolution in Complex Projects. New Strategies Are Adopted for a Spectrum of Conflicts (Conflict Continuum). The DRL Is Adopted to Prevent and Resolve Disputes.(Chek Lap Kok Airport)

5. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 5 Stage 1: Prevention PARTNERING PREVENTION NEGOTIATION STANDING NEUTRAL NONBINDING BINDING LITIGATION Conflict Management Plan

6. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 6 Stage 1: Prevention Conflict Prevention : More Effective, Less Expensive and Less Time Consuming Than Conflict Resolution (Office Building Project And the Illustration of Preventive Measures) Different Prevention Techniques But Many Common Denominators Importance of the Recognition of a Potential Threat and the Commitment to Avoid it

7. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 7 Partnering PARTNERING PREVENTION NEGOTIATION STANDING NEUTRAL NONBINDING BINDING LITIGATION Conflict Management Plan

8. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 8 Partnering Partnering, a Complete System of Operation, not a DRL Stage Advantages: (Museum Project and Success Keys ) Less Exposure to Liability Through Open Communication Early Identification and Resolution of the Problems Risk Sharing Increased Productivity Better Quality Through the Empowerment of Workers Better Cash Flow and Reduced Costs Commitment of all participants Synergy and Objectives Alignment Win/win Philosophy Problems Associated with Partnering Demand on Everyone Committed to the Partnering Process Difficulty with Taking the Risk of Trusting Others Tendency to Believe in the Win/lose Approach

9. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 9 Stage 2: Negotiation PARTNERING PREVENTION NEGOTIATION STANDING NEUTRAL NONBINDING BINDING LITIGATION Conflict Management Plan

10. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 10 Stage 2: Negotiation Negotiation as the First Stage after the Occurrence of a Dispute Participants with High Degree of Control Over the Possible Outcomes Possible Involvement of a Third Party Facilitator Interests Based rather than Positions Based Negotiations Attempt to Reach a Non-zero Sum solution with a Win-win Outcome (Highway Interchange Project) Different Negotiation Styles: Avoiding, Competing, Accommodating, Compromising, Collaborating Three Techniques in the Negotiation Process : Step, Structured and Facilitated Negotiations

11. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 11 Stage 3: Standing Neutral PARTNERING PREVENTION NEGOTIATION STANDING NEUTRAL NONBINDING BINDING LITIGATION

12. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 12 Stage 3: Standing Neutral Common Denominators of Techniques Used in the Standing Neutral Stage(Ex:State-of-the-art Land Level Transfer Facility in the Northeastern United States) Third Party Involvement Unbiased Decisions Knowledgeable Expert Cost,Time and Resources Savings Variations Number of Agents Involved Relationship of the Agents with the Project Stage of Involvement

13. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 13 Stage 4: Non-Binding Dispute Resolution PARTNERING PREVENTION NEGOTIATION STANDING NEUTRAL NONBINDING BINDING LITIGATION Conflict Management Plan

14. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 14 Stage 4:Non-Binding Dispute Resolution Ex: Condo Project Mediation Conciliation Advisory Arbitration Fact-Based Mediation Minitrial Jury Trial and Rent- a-Judge Flexibility:decreases along the continuum, less chances for win-win solutions Formality:increases as the techniques required more predefined steps Third Party Role: moves from a facilitator of communications to a judge or jury with only advisory opinion Costs:expenses should be expected to increase as the procedures become more complex Peña-Mora,et.al,1997

15. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 15 Stage 5: Binding Dispute Resolution PARTNERING PREVENTION NEGOTIATION STANDING NEUTRAL NONBINDING BINDING LITIGATION Conflict Management Plan

16. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 16 Stage 5: Binding Dispute Resolution Ex: Reservoir Project Common Characteristics Between Arbitration and Litigation High Costs Time Consumption Strains in the Relationship Among Parties Increased Formality Decrease in Control by the Parties and in Flexibility of Outcome Adversarial Stance Win/Lose Outcome Valuable Trait Reliance on Knowledgeable Third Party Neutral Other Binding Procedures as Modification of Arbitration Mediation-Arbitration and Shadow Mediation : Increasing Mediation During Binding Procedures Adjudicator and Baseball Arbitration: Rapid Closure of Dispute, Less Communication, win/lose outcome

17. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 17 Stage 6: Court Alternatives and Litigation PARTNERING PREVENTION NEGOTIATION STANDING NEUTRAL NONBINDING BINDING LITIGATION Conflict Management Plan

18. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 18 Stage 6: Court Alternatives and Litigation Litigation, the Final Stage in the DRL Importance of Solid Discovery of the Situation and Effective Presentation (Ex: Hospital Heating Plant Project) Procedures to Overcome the Challenges of Litigation by “Forced” Communication Court Appointed Experts Judge Pro-Tem Trial by Reference

19. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 19 Conflict Management Plan PARTNERING PREVENTION NEGOTIATION STANDING NEUTRAL NONBINDING BINDING LITIGATION Conflict Management Plan

20. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 20 Conflict Management Plan Conflict Management Plan (Ex: Brock’s and Kelly’s Plans) Vital Step in Construction Projects Often Overlooked Conceived in the Planning Phase and Reviewed Throughout Project Life Cycle Identifying Conflicts and Analyzing Their Impacts Prioritizing Conflicts Application of Dispute Avoidance Techniques Design of a Resolution Procedure Allocation of Risks Between Participants

21. Introduction to Construction Dispute Resolution Wrap-up © Peña-Mora, et. al. 2002 21 Case Study: Tren Urbano Partnering and the Success of Innovative Delivery Methods in a Global Market Importance of Partnering in Multi-Cultural, Multi- Phase Projects Partnering Embodied in Initial Meetings, Quality Summit, Follow-Up Meetings Conclusions and Recommendations Contract Language Regarding Conflict Resolution Is Not the Source of Problems Inter-phase Conflicts Require Additional efforts