Alternate Dispute Resolution and Beyond. May 23, 2013 Stephen Revay, FSCS. Agenda

Transcription

1 Alternate Dispute Resolution and Beyond May 23, 2013 Stephen Revay, FSCS Agenda Warning signs out of control ADR During Construction ADR Post Construction Conclusions 1

2 Warning Signs Owners who: have unrealistic expectations fail to properly develop project cut corners on investigations and design inappropriately shift risks to contractor 2

3 Realistic Schedule Engineering DELAY Project Completion Overlap Increased overlap Construction Failure to move start and end dates notwithstanding initial delays causes unrealistic schedule Fast Track 3

4 Fast Track & Hard money Excellent source of business for claims consultants Engineers who: Warning Signs pass on design responsibilities to Contractors agrees to unrealistic expectations have vested interest in disputes produce ambiguous or conflicting documents 4

5 Petro Canada CEO Ron Brenneman Reporting on $1.9 Billion overrun RCP Edmonton "The root cause of these problems is poor quality engineering and subpar site management. At Fort Hills we are putting most of the engineering work outside of the overstretched Alberta market and we are assembling a stronger owners team." Calgary Herald July 25, 2008 Warning Signs Contractors can make the situation worse if they: don t satisfy notice provisions cut corners to offset bid deficiencies abuse subcontractors don t read the contract or assume it will not be enforced fail to keep adequate project records don t document claims properly fail to develop and update schedules 5

6 Lessons Learnt Repeated ARTICLES TO READ NOTICE PROVISION CHANGES/EXTRAS DISPUTES AUTHORITY SOIL SITE CONDITIONS DELAY PAYMENT 6

7 RT F C Words of Wisdom Education is what you get when you read the fine print...experience is what you get when you don t. 7

8 Getting in Control When do we use E mail? 79% checked in the bathroom 77% while driving 11% while engaged in intimate behaviour 41% while their commercial plane was in the air 94% during work nights or weekends 96% while on vacation * Taken from Mobile Messaging Marketing Trends, 8

9 Communication Elements A. Barbour, Louder Than Words: Nonverbal Communication, Electronic Media Discovery (EMD) Voice Mail Text Messages Messages Laptops, Tablets & Desktops Memory Sticks CDs & DVDs Hard Drives Servers 9

10 ADR During Construction Dispute Review Board NEC Contract Project Mediator (American) (Great Britain) (Canadian) ARBITER DESIGN CONSULTANT 10

11 Fight each other or be PROACTIVE Innovative use of Expert Opinions Productivity and Delay claims 11

12 Options Each party engages claims consultant Each party diverts project people to perform analysis Two parties engage independent to provide objective basis Proposed Best Alternative The appointment of an impartial independent claims consultant to offer: Unbiased advice and decisions Assist in negotiation Conduct forensic analysis at half the cost to each party 12

13 Forensic Analysis Initiation of Process Fact Finding Draft Report Final Report Initiation of Process Differences with regards to delay / productivity One termination dispute Generally speaking not scope issues 13

14 Fact Finding Access to documents from all parties; Access to project people from all parties; Better results less cost; Opportunity to discuss weakness confidentially; Can involve legal counsel from each party. Draft Report Same Report to Each Party Issued with the expectation that it will be challenged Each party has input into final result Manage expectations regarding outcome On occasion settlement reached before final is submitted 14

15 Final Report Parties have contributed to final result Legitimate interests have been considered Most economic alternative Based on objective criteria Advantages Benefits Early attention Site personnel remain focused All costs known before completion No bias or personnel agenda 15

16 Unfounded Criticisms increases project costs creates disputes inappropriate for construction POST CONSTRUCTION 16

17 RESOLUTION OF CLAIMS NEGOTIATION QUASI MINI TRIAL DISPUTE REVIEW BOARDS MEDIATION ARBITRATION LITIGATION Electronic ADR THE REALITY BEHIND SETTLING CLAIMS Most construction claims are settled onsite [direct negotiations] Negotiation is the preferred resolution method Why do alternative dispute resolution methods exist? These methods are an attempt at the next level of resolving outstanding issues 17

18 A party to a dispute, particularly if there is an arbitration, will learn these three lessons (often too late): 1. The importance of records 2. The importance of records, and 3. The importance of records Abrahamson, M.W. Engineering Law and the ICE Contracts (4th edn, 1985) 18

19 Documentation is a tool that most contractors do not use effectively. Good documentation of the events leading to and supporting a contention that a variation occurred can mean the difference between settling a valuation there and then, and waiting some years to re present the argument before a judge or arbitrator. Pickavance K. Delay and Disruption in Construction Contracts, 1997 Non Adversarial Communication claims are about money not people 19

20 What is being said Owners say What is happening Contractors say We want to know early on when there are problems Owners become defensive and more rigid with no give and take becomes war zone DETERMINING YOUR BATNA Evaluate Damages Cause and effect Consulting with Legal Services to evaluate the litigation risk value legal exposure risk percentage More than opinion do your research 20

21 KNOW YOUR BATNA Best Alternative To a Negotiated Agreement Before Negotiation, one should know His/Her BATNA to weigh offers and counteroffers that PM will receive during negotiations to protect a PM against reaching an agreement that possibly should have been rejected QUASI MINI TRIAL RESPECTIVE PRINCIPALS OR COURT SANCTIONED 21

22 MEDIATION VOLUNTARY NON BINDING FACILITATED NEGOTIATION Why Mediate Cost Speed Control Informal Separating people from the problem Preserving Relationships 22

23 Consider Mediation Parties are willing to meet and settle Parties want a flexible and informal process Parties have an interest in maintaining a relationship Parties wish to keep the matter private ARBITRATION IS THE OLDEST FORM OF DISPUTE RESOLUTION GOING BACK TO THE ROMAN EMPIRE 23

24 ARBITRATION BINDING 1 OR 3 ARBITRATORS SELECTION OF NOMINEES Survey of 1,000 US firms Price Waterhouse Cornell University The Foundation for the Prevention and Early Resolution of Conflict (PERC) 24

25 Arbitration the process 69% likely to use 31% unlikely to use 79% have used Mediation 84% likely to use in the future 17% unlikely to use in the future 88% have used the process 25

26 It has been said that the greatest lesson the litigation process offers disputants is that, in comparison, it makes all other forms of resolution quite attractive. SO YOU THINK YOU WANT TO CLAIM? Claim: Sub vs. GC $1.75M GC vs. Owner $1.35M Owner vs. GC $5.00M Result: After 99 days of discovery and 132 days of trial, almost six years after substantial completion of the project: 26

27 SO YOU THINK YOU WANT TO CLAIM? Sub got $1.1M, but incurred $1.2M in legal costs GC got $0.9M, but had to pay $300K to the Sub, plus $1.8M in legal costs The Owner had to pay a total judgment of $1.7M, had its counterclaim dismissed, and incurred $1.1M in legal costs Foundation Company of Canada v. United Grain Growers, BC Supreme Court, days of discovery 37,000 pages of exhibits 132 days of trial decision 330 pages 6 years after completion $4 million on legal fees; total win approximately half that amount 27

28 Online Dispute Resolution Can be used to manage process Can be used to reach settlement Akin to shopping on Ebay Questionable for construction industry 28

29 ADVISORS Lawyers / Claim Consultants Don t handcuff do manage Not a poker game Beware of advisors who are in it for the game or the fees and not the results 29