2 Step 1: Review the Dispute Resolution Procedure

      The first step in the claims process is for the claimant to begin with the end in mind. While it is preferred for the claimant to negotiate a reasonable settlement with the respondent well before the binding dispute resolution process is initiated, it is important for the claimant to understand the overall pathway for dispute resolution up front, rather than learn about it along the way—which is too often the case and this can be a costly learning curve. For one thing, an understanding of the overall dispute resolution process allows claimants and respondents to make sound business decisions before the resolution process incurs significant legal, expert, and mediator/arbitrator/court fees. In addition, if the claimant deems the respondent to be irrational, they might decide to expedite the process toward binding dispute resolution.

Nearly all contract agreements that relate to a construction project define the dispute resolution procedures. The construction industry uses either standard or proprietary contract forms. Most agreements related to private construction work use standard contract forms, while most public improvement projects use proprietary contract forms. The three most common standard contract forms that can be purchased online are published by: (1) the American Institute of Architects (AIA), which are primarily used for building projects;¹ (2) the Engineers Joint Contract Documents Committee (EJCDC);² which are generally used for horizontal infrastructure projects; and (3) ConsensusDocs³ that are applicable for both horizontal or vertical construction projects.

Most federal, state, and local agencies use proprietary contract forms that are designed to address specific project types and regulatory requirements. For federal agency work, the dispute resolution procedures follow Federal Acquisition Regulation (FAR) requirements. State and local agencies stipulate dispute resolution requirements based on preference. Certain private owners also use proprietary contracts forms, particularly those that let a large volume of construction work.

      Depending on the contract form, the dispute resolution process can be quick or lengthy in duration. If lengthy dispute resolution provisions are required and the claim value is relatively small, the claimant might not want to involve attorneys and expert consultants until the binding dispute resolution stage, particularly if the contract does not include a prevailing party provision that allows for the recovery of fees. If this is the case, the claimant might win the case, but lose the war because fees can wipe out most, if not all, of an award, and then some. Thus, claim administration involves cash flow forecasting and likely outcome predictions in order to properly manage settlement negotiations throughout the dispute resolution process.

      Typical dispute resolution steps involve: (1) the claimant issues a notice of claim to the respondent; (2) the respondent renders a decision on the claim; (3) if the claimant finds that the respondent's position is unacceptable, the claimant triggers a non-binding dispute resolution, such as mediation; and (4) if the non-binding dispute resolution does not resolve the claim, the claimant moves forward with a binding dispute resolution. The timing and specifics for each of these steps vary from contract form to contract form, so it is imperative for the claimant to understand the dispute resolution procedures of the subject agreement.

      Dispute resolution provisions also vary depending on the parties to the agreement, so owner–contractor agreements have dispute resolution terms that differ from contractor–subcontractor agreements, and both differ from the terms of owner–designer agreements. Note that the project delivery method used on a given project alters the duties and responsibilities of the parties, so it is important to know whether the delivery method is design-bid-build with a stipulated sum, design-bid-build with a guaranteed maximum price, construction manager for fee, construction manager at risk, design-build, engineer-procure-construct, integrated project delivery, etc.

      The following sections review the dispute resolution provisions for various types of agreements.

I. Standard Contract Forms for Owner–Contractor Agreements

The following is a list of dispute resolution provisions for the three commonly used standard contract forms for owner–contractor agreements. Note that each form allows the parties to edit the contract before execution, so it is important to review the exact dispute resolution provisions within the subject contract.

      A. AIA A201 General Conditions, Article 15, Claims and Disputes

      The AIA was founded in 1857 and it is a professional organization for architects in the United States. The AIA's main design-bid-build contract forms between an owner and a contractor (AIA A101, A102, and A103 forms) all incorporate the AIA A201 General Conditions, which include the dispute resolution provisions for these contracts. The AIA's primary construction manager as constructor (CMc) contract forms (AIA A133 and A134) also incorporate the AIA A201 General Conditions. Article 15, “Claims and Disputes,” of the A201 offers the following dispute resolution steps:

      B. ConsensusDocs 200, Standard Agreement and General Conditions Between Owner and Constructor

      ConsensusDocs was founded in 2007 by a coalition of architecture-engineering-construction (AEC) organizations. ConsensusDocs' owner–contractor contract forms integrate general terms and general conditions into one document.