A Tale of Two Slabs
The route each took to resolve its construction dispute demonstrates the effective use of Early Neutral Evaluation and Mediation, the misuse of Arbitration and shows why an evaluative mediator who is a construction expert and can play the role of devil's advocate to the substantive issues in dispute will be more successful in helping the parties achieve a settlement in this increasingly popular method of resolving construction disputes than a mediator who is a layman and can only play the role of a facilitator.
Beyond an almost identical, boiler-plate concrete specification that controlled the slab construction, there was nothing in the job documents of either project that required the slabs to meet higher standards than those expected by the custom of the trade or the standards of the industry. The owners, however, had their own standards.
The hanger owner, the CEO of a national airline, expected a blemish-free slab surface with a showroom finish, one that shareholders, scheduled to attend a banquet at the hanger to inaugurate a new passenger route, could eat off of. He had stopped progress payments demanding that the slab be "fixed."
The owner of the warehouse, who had been using the wine distribution center for over two years out of necessity but had complained about the condition of the slab since its completion, demanded a new slab or equal compensation, no more, no less.
Each construction contract specified arbitration as the means to resolve disputes. This was the route the warehouse owner took when faced with the contractor's adamant and continued refusal to meet his demand. The other owner, however, was shown a different path; early neutral evaluation followed by mediation.
[Intervention by an early neutral evaluator is an excellent, cost-effective consideration at the first rumblings of a construction dispute, a move that can nip it in the bud. Such a construction expert can be hired by either side individually or both sides jointly, to give each a neutral, bias-free opinion about the dispute. One side can even offer to engage an expert for the other when the other side, and its attorney, seem unsophisticated about construction disputes or when negotiations are at impasse.]
The consultant agreed with the hanger contractor's position that the slab's condition was well within the acceptable standards of the industry for such a facility. Anticipating this confirmation, the contractor promptly contacted the owner and requested that the expert be permitted to attend a meeting scheduled with the owner for the following week. Despite being openly apprehensive about an expert called in by the contractor, the owner okayed the expert's attendance and agreed to listen to whatever he had to say about the slab. When further advised that the construction expert was a mediator as well, he also agreed to hear about mediation.
Within an hour the owner agreed to accept a generous offer by the contractor to compensate him for the 'pain and suffering' from, his dissatisfaction with the slab. It was more than the contractor wanted to pay but it "saved face" for the airline owner, who now realized that his demands were unrealistic, and more importantly, it preserved for each an important business relationship as well as the cost in time, money and aggravation of a protracted dispute. The owner was entitled to compensation and the extra funds thrown into the settlement by the contractor was money well spent.
Each party further agreed to split the cost of the early neutral evaluator/mediator; a cost of a little more than $1000 each and far less than it cost the parties in the warehouse dispute who were embroiled in a 'slug it out' arbitration.
Soon after the arbitration began it became clear to this writer (a member of the three-arbitrator panel) that the warehouse attorney, a former judge, was a great litigator but unsophisticated about construction. He and his client would have benefited from the insight of a construction professional. And, as the evidence unfolded, it became equally clear to the arbitration panel that the owner had seriously overestimated the value of his case.
During the two years the warehouse was in use the condition of the slab did not inhibit nor interfere with warehouse operations. The cracking condition had stabilized and random coring verified that the slab's thickness and reinforcement conformed to the specification. There was no differential settlement, nor were there new cracks or widening of existing ones for some time. All that was required were some epoxy repairs to correct the present condition. Beyond that the owner's recovery was limited to an allowance for depreciation, inconvenience and maintenance over the life of the warehouse. This was an easy call for the arbitration panel, a call that an early neutral evaluator could have made long before the arbitration went forward. Had this owner that input, taken heed and investigated, chances are he and the contractor each would have avoided the $100,000 and 6 months of time the arbitration devoured. And unlike those in the hanger dispute, it is unlikely that these parties will ever do business again.
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