In construction, disputes can occur at any stage of the process, from early commitments to fundamental disagreements over project performance. Many construction projects are governed by contracts, which outline the promises made between parties throughout the project. When one party is unsatisfied with a particular aspect of the contract, they may file a lawsuit to have the contract violated. So what is construction litigation?
Arbitration is a form of alternative dispute resolution in construction litigation
The process of arbitration is a form of alternative dispute resolution used in construction litigation. In arbitration, both parties agree to stipulate undisputed facts and issues of law. It encourages the arbitrator to rule on those items in a summary fashion before hearing evidence. However, arbitration is only effective if the arbitrator considers the issues deemed most likely to cause disputes. In addition, arbitrators often use an equity-based approach when rendering decisions, so each party must be able to make its case.
The most common form of ADR is arbitration. It’s a way to resolve a dispute privately with a neutral third party. Unlike courtroom trials, arbitration is conducted in a confidential forum. While arbitration hearings tend to be more relaxed than courtroom trials, the arbitrator does have wide discretion to determine the outcome. Therefore, knowing how this process works is important before deciding to pursue arbitration.
It is a negotiation between disputants administered by a neutral third party
Dispute resolution in construction matters can be achieved through a variety of different means, including arbitration, mediation, and conciliation. Mediation can also be done through a process known as “self-administered ADR,” where the parties themselves administer the proceedings. In some cases, parties may use a neutral third party, or they may hire a third-party mediator to help facilitate the process.
A neutral third-party administrator will evaluate the case early to determine whether mediation or arbitration is the appropriate dispute resolution method. Early evaluation involves an unbiased third-party reviewer who evaluates the parties’ positions and potential exposure to monetary damages. Next, counsel for both parties and the neutral will engage in discussions with the mediator or arbitrator to isolate issues in dispute and identify any agreed-upon facts. Settlement negotiations may then follow the process.
It is a competitive bidding process
In the construction industry, the bidding process is when a contractor or supplier puts forth a proposal for a project. The process involves numerous legal considerations. Primary contractors must be careful when choosing subcontractors, as they are responsible for illegal labor practices. In addition, the contractor must be adequately bonded and abide by the rules of government construction projects. While this may seem straightforward, building contractors are held to government regulations. While private contracts do not involve government agencies, a contractor must still comply with local, state, and federal laws.
Competitive bidding is beneficial for all parties involved. Public entities and companies competing for projects benefit from it. Competition keeps costs down and draws in the best companies for the project. Government agencies also benefit from the process, which helps keep costs down and attract the best and most qualified firms. Most government agencies set up the bidding process as a reverse auction. Essentially, the buyer and seller reverse roles in this process, with the bid starting at an exact figure and decreasing based on the submissions. The process continues until the open bid period is completed.
It is time-consuming
Construction litigation is expensive and time-consuming and is ineffective for all disputes. Although most construction stakeholders agree that disputes are marathons, they would much rather avoid them altogether. Disputes involving financing or employees can damage a business’s reputation and cause unnecessary delays. In addition, each day spent in litigation costs time and money.
Trials are public. Anyone can watch them and review all court documents. Moreover, most courthouses post case decisions online. Even if triers of fact are unfamiliar with construction, anyone can still access the outcomes. Fortunately, there are several steps owners can take to avoid construction litigation. To begin, owners should consider hiring a mediator. Such mediators can help the parties resolve their differences. They can also represent their clients in construction bankruptcy cases.
It is expensive
Construction litigation is expensive. Attorneys’ fees account for the bulk of the total costs. In addition, expert witnesses are often required for complex design issues. The number of experts needed will depend on the claim’s complexity and the documentation volume. These fees can easily reach six figures in larger cases. Although it is impossible to anticipate every potential dispute, construction professionals should take proactive steps to avoid them. There are numerous ways to reduce the cost of construction litigation. If you can control the cost of dispute resolution, you’ll be better prepared to handle any litigation.
The most common way to pay a construction lawyer is by the hour. This payment structure is common in construction companies and helps them estimate the total number of hours required for the case. Attorneys work on a contingency basis and often combine both payment structures. In any event, discussing the payment terms with a construction litigation attorney is essential to understand how much the case will cost and avoid being surprised by a bill at the end of the process.