What should you expect from construction mediation

Autor: William Kerivan
Estados Unidos

INTRODUCTION

Preparation for construction litigation can be an arduous and complex process. The parties are engaged in all sorts of analysis, document control and retrieval, development and preparation of witnesses and trial exhibits, all consistent with the general plan to recover or defend against the matter in dispute.

The focal point of this effort is to convince the judge in a chosen forum that the facts of the disputed situation lead to the legal conclusion that the party desires. The litigation process normally entails the presentation of their case in a traditional courtroom setting before a judge and often a jury. While the party's individual experience in a court system may vary, the U.S. Court system is considered ideally suited to handle commercial disputes. However, the cost associated with this form of dispute resolution is considered very expensive. Beside the expense of the litigation process, hasn't something fundamental been relinquished by the parties by allowing someone else to determine the result to their dispute? Not if they successfully use the Alternative Dispute Resolution procedure, Mediation.

What is Mediation? It is a "private, informal dispute resolution process in which a neutral third person, the mediator, helps disputing parties to reach an agreement." A key part of this process is the fact that "The mediator has no power to impose a decision on the parties."

Why use mediation? Each party, in assessing whether mediation should be employed in the successful resolution of their dispute, must evaluate several items. They should assess the technical matters in dispute. Next, they should assess the current relationship between the parties and the speed with which the dispute needs to be resolved. Finally, they need to assess the personality of the respective parties.

Who should use mediation? At some risk of oversimplification, it has been my experience that mediation is ideally suited for construction disputes on matters where both parties can technically understand and appreciate the differences of opinion, where they have a sensible outlook to the ultimate resolution, and where a continuing relationship is valued.

OVERVIEW

The element of difference is common to disputes and conflicts. As a result, a mediator would find it very difficult to function in the same manner in each case or follow a prescribed pattern. Mediation is a fluid mix of procedural, communicative, and substantive functions all occurring dependently with each other. In the following discussion, mediation skills that are necessary to allow the parties to deal with these necessities of procedure, communication, and substance during the process are examined. In this regard, a description of the events in the mediation process is provided, as well as the interaction you should expect by the mediator as you prepare, participate, deliberate, and hopefully settle the matter in dispute.

In this paper it is my intention to discuss the process of mediation, inform potential participants what may occur by exploring the interactive efforts of the process, and provide the reader an understanding of what the mediator is attempting accomplish. In conjunction I will develop and offer some suggestions and points to consider as one prepares for mediation of a construction dispute.

PREPARATION FOR MEDIATION

Preparatory efforts for mediation will require that each participant perform certain tasks. The mediator will initiate contacts with the parties, collect and analyze available information, and work with the parties to decide on a plan and a strategy. While performing these tasks, the mediator's goal will be to establish a basis of mutual trust. The mediator will also attempt to deal with, and lay the groundwork to overcome, whatever reservations the parties may have to explain positions or reveal areas of possible accommodation.

Each party will necessarily accomplish some degree of planning. In a sense, planning is the formulation of the key ingredients to establish a strategy that is followed through by performance as the mediation occurs. The following topical discussions introduce a suggested approach to planning. The use of situational analysis, goal identification, and needs assessment are necessary and important to the formulation of the mediation plan.

* Situational Analysis

The nature of mediation is such that to predict with absolute certainty the exact course the mediation will take is impossible. However, preparing so that you are not unduly surprised by events is possible.

The first task in preparing for mediation is to arrive at an honest assessment of your position. How important is this dispute to your firm? How important are you to the other party? Are the services or goods you provide obtainable elsewhere, or are you an acknowledged leader in a highly specialized field? What are your goals and potential weaknesses? In the typical construction contract, fierce competition is the rule, and the positions of the owner and the contractor are different enough to provide lively negotiation.

Important considerations for evaluating the matters in dispute are identification of the factual events, each contract provision that establishes entitlement, the timing of contract performance, and the total cost of the disputed work including a reasonable profit. Of course, timing is a perennial headache for construction contracting firms, and coordination of manpower and materials is a difficult task for management, even under the best of circumstances. However, current computer programs and software may assist both parties to understand the matters clearly and expedite the mediation process. The dispute becomes more easily resolvable if the total cost of the disputed work is not difficult to ascertain. In mediation, I suggest that having complete and accurate cost and pricing data for the items in dispute is essential for the parties. Every element, to the extent feasible, should be separately priced so that the parties can quickly and accurately assess the cost impact of the disputed work.

After completing this initial exercise, an important part of an assessment is to attempt to identify areas of agreement and disagreement. Is it possible to agree on the type of weather, the conditions encountered, and the circumstances of the event? In telling the story, generating documentation supporting your conclusions is important. Occasionally, an opponent will suffer a memory lapse or, in more difficult situations, question the veracity of your statement or claim. When this happens, being able to support your position to maintain credibility and reduce the opportunity for an acrimonious exchange is important.

* Identification of Objectives

After gathering all possible information and data concerning the dispute and having done a situational analysis, I suggest a party identify the objective of mediation. What price do you want to pay or receive for the performed work? How long should the contract performance period be extended? What assurances of quality and service does the owner require from the contractor? How much information is either party prepared to reveal?

I suggest that objectives be ranked important, unimportant, and very important, and then separate them as to their desirability and necessity. As mediation sessions become intense, the parties may lose focus of their objectives unless well thought out in advance.

* Needs Assessment

Another necessary element of preparation is an assessment of needs. Each party should consider the rules and procedures of the mediation and the objectives the other party desires to accomplish. Who, within your organization, should represent your point of view and decide where and when the mediation is held? What evidence and facts will you rely on and how will it be presented? Are there any special items or issues that require advanced planning?

PARTICIPATION IN MEDIATION

The mediation process will begin with the parties participating in an all-inclusive meeting. Here the mediator will assume a leadership role by providing procedural and communicative guidance. In this event, the mediator will:

- Explain the mediation process, making sure the parties understand its purpose and objective (to help them decide a way to resolve their differences).

- Explain how the mediator got involved in this dispute and the role the mediator will play.

- Inform the parties how the mediator has successfully helped other parties, and review the mediator's background in areas related to issues in dispute.

- Explain that the mediator is not a spokesperson for either side but may function as an agent of reality, assisting the parties to comprehend what they are saying and the implications thereof. The mediator will likely emphasize his/her technical expertise that could help the parties develop a satisfactory remedy.

- Encourage open, supportive communication by helping parties focus on problems in an empathetic manner.

Once the preliminary events have taken place, the parties will likely be involved in a discussion of the issues in dispute. During these discussions, people will exhibit some behavior that the parties may employ interchangeably during mediation and negotiations. I have characterized, with a hint of humor, behavioral patterns that we all have experienced:

* "No-nonsense" Approach

The "No-nonsense" approach usually finds a participant presenting a confident, aggressive attitude. This is characterized by behavior that is very positive and conclusive in their approach to the matter in dispute. Sometimes this type of participant can make large initial demands as to monies owed, facts in dispute, and legal conclusions as to matters in contention. They likely will have extensive backup material on points at issue and will also be convinced as to the "rightness" of their position. Dealing effectively with "no-nonsense" parties means the other side must be extremely well prepared as to the facts in dispute and be able to present clearly with demonstrative evidence their position.

* "King of the Hill" Approach

The "King of the Hill" (KOTH) occupies a position of superior power where the threat of nonperformance places the other in an untenable position. This approach can be overplayed, and the temptation to overreach is always present. The risk is great that the disadvantaged party may become so offended by this approach that it resolves to "get even" with the KOTH at some point in the future. KOTH is not preferred behavior for a successful mediation.

* "Analytical" Approach

The "Analytical" approach is often used by owners to counter an excessive change order proposal. The goal in its use is to break down the contractor's proposal into its component parts. It is widely believed that all proposals are inflated and such inflation will become apparent when items of the proposal are priced independently.

This demand for information is typically defended against by the opposing party by claiming the data required is unusually difficult or expensive to assemble or that the disclosure of costs or pricing data would reveal a trade secret. Another reply is that the detailed information necessary for such breakdowns is simply unavailable.

* "One More Thing" Approach

The "One More Thing" approach is sometimes used to place additional demands after a tentative, or even final, agreement has been reached. This approach relies for its success upon the presumption that once a deal is concluded, the other side will be reluctant to lose it because of a few additional demands.

This approach has the certain risk that the opposing party will meet attempted escalation with vigorous and resolute protest. In my experience this approach is hardly ever successful. In order to discourage this type of behavior, the parties often have the initial agreement reviewed and signed off by as many people as possible. This being accomplished, subsequent escalation is made more difficult.

* "Take It or Leave It" Approach

The "Take It or Leave It" approach occurs when a party says that this is their best and final offer and simply is not going to negotiate further on the point. I suggest that the "take it or leave it" approach is a trite exercise in brinkmanship. Many proponents use a modified form of this approach. They make an initial offer that is close to their limit and suggest in strong terms to their opponent that in their opinion, this is where the negotiations should come out. This modified technique is used to best advantage where the parties have a continuing relationship and where trust and amicable relations have been established. The success of this modified technique rests almost solely upon the credibility of the proponent.

As the parties present their views, the mediator will chart either a course to resolution or impasse.

During the discussions to reach an agreeable resolution, the mediator will attempt to identify and clarify the issues in dispute and deal with the problem of an impasse. The mediator will likely:

- Allow the parties to describe the unresolved issues and their views (in their own words with the other party listening).

- Probe to get the parties to give additional information.

- Ask the parties substantive questions.

- Summarize what a party has said and ask if their summary is correct.

- Ask a party to restate the problem as explained by the other party and then request the proponent to confirm the accuracy of the statement.

- Restate a party's priorities and positions.

- Identify points of agreement and disagreement.

- Identify differences between the written complaint and oral statements.

Impasses in the mediation process can and do occur. They will develop for many reasons. There may be a clear difference of opinion, emotions may take over control of reason, or the parties may have stopped listening to each other. If an impasse occurs, the mediator will attempt several things. The mediator may:

- Take a brief recess to let the parties cool off and reconsider their positions, giving a party time to gather their thoughts.

- Make appropriate suggestions.

- Ask hypothetical questions and explore hypothetical situations. Sometimes by creating doubts in the minds of parties that there are alternatives, the parties may resume discussion as they develop a better approach of their own.

- Make each party prepare, think through, and justify its positions, and deal with the other party's arguments.

- Encourage a reluctant party to continue.

- Ask the parties to reconsider the problems as if they had just occurred.

- Point out the consequences of no agreement.

- Make use of external pressures (e.g., deadlines, constituency, politics, laws, etc.).

- Seek possible tradeoffs or withdrawals.

- In group disputes, seek "summit" with a spokesperson of each side.

- Deflate extreme or unrealistic demands or positions.

- Translate positions and proposals into understandable and legitimate terms.

Through a process that uses both joint and private sessions, the mediator will assist the parties in the meetings as described above. In a joint session, the mediator chairs and controls the sessions to assure orderly proceedings and productive discussions. The mediator can use joint sessions much like open court initially to discuss unresolved issues, find out and clarify positions of the parties, explore alternatives, exchange proposals between parties, and complete an agreement.

The mediator may also find it necessary to hold several private/caucus sessions with each party. The mediator may forego private/caucus meetings until sufficient trust is established with the parties that the process can work. Additionally, a caucus session may be necessary when discussions become so heated that emotions are supplanting reason and a continuation in a joint session may cause the parties to take extreme positions from which retreat would be difficult. Similarly, the mediator calls caucuses when joint discussions have reached a stage where further progress is impeded. Other reasons to break off into a caucus is when parties have shown a possible area of accommodation and a mediator needs to develop and crystallize a specific area of agreement, or when parties have indicated no flexibility in their positions and a mediator needs to loosen their rigid stance before movement is possible. In this form of shuttle diplomacy, the mediator may move back and forth between parties and bring them back to joint sessions at appropriate intervals.

During each caucus, the mediator will continue to build the confidence of the parties in a mediated solution in order to encourage a candid appraisal of their ultimate needs and priorities. This method allows the mediator to identify possible tradeoffs and alternative solutions. Once these items are evident, the mediator can explore tentative solutions more quickly and directly in the caucuses than would be possible in joint sessions. Additionally, the mediator can gain a better understanding for the realities of the conflict and be in a better position to influence the parties to seek alternatives and tradeoffs.

BUILDING CONSENSUS

While I have suggested that we consider the mediation process as a series of events, it is my belief that building consensus should be carefully considered through all the events. It is imperative for the parties to know if their goals are being realized. In this regard, a necessary objective of a mediator is to make each party consider and deal with the other party's arguments and the search for options to allow resolution and settlement.

Typically, priorities shift as ideas meet opposition, different facts are considered, and underlying circumstances change. By exposing the soundness of a questionable conclusion, a party may reappraise and modify its position. The mediator helps each party to find out if its positions are truly realistic and acceptable to the other side. In effect, the mediator increases the perception of each party to the other side's needs and builds a reality parameter within which the parties can assess the consequences of either continuing or resolving the conflict.

HANDLING EMOTIONS AND DIFFICULT ISSUES

If the negotiations become too emotionally charged or for other reasons, the mediator may suggest a summit meeting with only the principal spokesperson for each party. The goal of such a meeting is to narrow the issues. It may also be the only way to overcome a major obstacle and to try out ideas or search for solutions. The mediator must be cautious in continuing with summit meetings if other team members begin to feel suspicious or useless. They may obstruct and undermine the effectiveness of the mediator.

Sometimes discussions on an issue reach a point where a need for more detailed work is necessary before achieving final resolution. The mediator can encourage the parties to create a small subcommittee to pursue the matter further and report to the principal negotiating teams. The principal negotiating teams can then proceed with other matters. The subcommittee members can more actively participate in the negotiations and obtain a greater sense of personal accomplishment.

At times, a mediator may suggest possible arrangements under which an agreement may be concluded. Once accomplished, the mediator may recommend the parties agree the remaining disputed items be resolved through fact finding or arbitration. During this event the parties, with the mediator's assistance, hopefully have weighed the matters in dispute both for and against a proposed course of action.

REACHING SETTLEMENT

A difficult aspect in any mediation is bringing the proceeding to a successful end. At some point in the mediation, a party will likely conclude that they have obtained what is sufficient to close the deal. When this happens, it is appropriate to say they wish to conclude the process. If the other party resists closing the deal, I suggest exploring specifically what matters remain where material disagreement is present and whether the unresolved matters are, in fact, important.

Once an agreement is signed by all relevant parties, the mediation task is complete. As final insurance against a possible breakdown, it is often recommended that the parties commence performance of the agreement immediately.

During this event the mediator will usually refrain from making any recommendations on settling the dispute. If recommendations are made and rejected by the parties, the mediator might lose his/her credibility. Recommendations implicitly suggest the mediator's opinion as to what would be a fair and equitable solution to the dispute. Recommendations necessarily should then be used only after forewarning the parties and obtaining from the parties at least their tacit acceptance of the recommendation. The mediator must be certain that any recommendation will at least narrow the differences between the parties, or the result can be worse than futile.

During the negotiations, the mediator should make certain that upon reaching an agreement each negotiating team will agree to unanimously recommend acceptance of the agreement to its constituency. When this is done, the mediator may need to help the parties in selling the agreement to their respective constituencies. The mediator will likely confine remarks to explaining the contents of the agreement and focusing on the gains contained in the final agreement.

ADDITIONAL MEDIATOR SERVICES

The mediator can also help the parties in monitoring the agreement. The mediator may help resolve complaints of noncompliance with the agreement and assist the parties in clarifying any misunderstandings as to the roles and obligations of each party. The mediator may also design appropriate dispute or grievance resolution systems to handle disagreements arising out of the agreement (i.e., fact-finding or arbitration).

If the situation is appropriate, the parties may want a total news blackout of their settlement discussions.

Additionally, parties may request the mediator to make press releases. In such a case, the mediator must check carefully with the parties to decide what, if anything, should be reported to the media.

CONCLUSION