Disagreements are always best resolved at the earliest stage. Construction disputes are no exception to that, and the earlier the better. Unresolved disputes can adversely affect not only the time and cost of performance; but also, and sometimes worse, relationships. And while the best dispute is one that never occurs, construction disputes can happen even for the best designed or well-run project.
Hopefully, when construction project disputes do occur they can be resolved by the job-site teams. The next best stage is resolution at the next level; typically, the project managers or project executives affiliated with the team members involved in the dispute. But when those efforts fail, the two most common next steps are mediation or arbitration of the dispute or both. So what’s the difference?
Mediation is a non-binding, facilitative approach to dispute resolution. The parties agree upon a third-party neutral who listens to the various arguments and, non-judgmentally (typically), works with the parties to help facilitate an agreed resolution, without imposing the mediator’s view. There are times though when, with agreement of the parties, the mediator may provide the parties with a view on the anticipated outcome; but even so the parties are not bound by the mediator’s view.
Arbitration is not facilitative. The arbitrator takes the place of judge or jury, and after hearing the evidence presented determines the outcome. While arbitration can be (but rarely is) non-binding (why do it if it’s not binding) or binding, it is typically binding with very little basis for appeal to a higher authority. Arbitration processes and other related aspects are typically part of the parties’ contract, and most states have statutory provisions allowing for arbitration and addressing related legal aspects.
For construction cases, mediators and arbitrators are typically subject matter experts, with extensive, practical construction project experience – typically being architects, engineers, construction consultants, or construction attorneys. Much thought should be given to the experience, and personality, of potential mediators or arbitrators; as both can directly correlate to outcomes. Both can be very effective, and cost-efficient tools for resolving disputes either individually or conjunctively; although each has its pros and cons.