Negotiating an In-Project Construction Dispute -

Many thorny and competing interests are implicated when an ongoing major construction project experiences an unanticipated event that impacts the project schedule or costs, and the parties are unable to resolve quickly growing disputes. The owner generally wants progress to continue while the contractor seeks cost or schedule relief. Both parties want to minimize risk, expense, and uncertainty, and they likely desire to maintain the relationship for future business. Yet the blame game often takes over, with each side becoming entrenched and taking strident positions through change order documents and lawyer-driven correspondence. With compromise often meaning that both parties end up unhappy, how are owners and contractors to proceed in a manner that prepares them for litigation yet also attempts to preserve the relationship and serve the ongoing project? Each project faces different challenges and will require independent evaluation. This article offers practical tips for the art of negotiating in-project disputes on major construction projects, and details how certain actions can meet all of these seemingly disparate needs.

Engage Sooner Rather Than Later -

Impact events should be expected on all major construction projects, and efforts should be taken both to prepare for this scenario and to mitigate the effect. Quite simply, the smaller the impact, the less cost or schedule there is to fight about. Thus, it generally is in everyone’s best interest to act consistently with the purpose of a notification letter: to engage and begin to problem-solve. While it may be tempting to “wait and see,” timely and substantive communications generally will benefit the project and mitigate the dispute. Yet self-interest is often served by such a strategy as well, as uncertainty regarding the project’s path—or how the parties will bear the impact—creates risk. Each party must consider their own risk tolerance for the possibility that claims will not be resolved until after the additional work is done, or even after the project is complete. When both parties voice their views and respective positions, each party is better able to assess the dispute and weigh its own risks at an earlier stage.