Construction Disputes - Mediations Increase

I recently had the opportunity to address the annual conference of the Scottish Building Contracts Committee on the topic of mediation in the construction industry.

In the past, these talks have been an effort to exhort people to make more use of mediation in the industry. However, now, as noted in research co-authored by Dr Bryan Clark of Strathclyde University, there is a significant increase in its use.

Indeed, in recent weeks, the majority of my mediations have been construction related: major projects, delay analysis, PPP, design and build, refurbishment, large and small developments, dilapidations, alleged professional negligence - some with a lot of technical and expert detail, others with more commercial or funding issues. Most have resulted in resolution in a day, or at most, two. Often, they are fixed up within a few weeks (or even days) of the first inquiry.

These disputes are usually multi-faceted, with non-legal, non-monetary and non-technical issues lurking under the surface, perhaps in addition to factual, quantification and legal points. People are concerned about financial risk, reputational damage, fractured contractual relationships, reduced productivity, distraction from business generation, uncertainty and risk.

They know that, as Abe Lincoln once said, "the nominal winner is often the real loser" in the zero-sum game of adversarial processes. Win/lose can become lose/lose.

The benefits of mediation can extend into project management - preventing escalation and nipping difficulties in the bud, unlocking sticky negotiations, increasing collaboration in ongoing contracts, focussing on shared interests and mutual objectives, enhancing joint ventures and rebuilding communication. "Just as important as the outcome is that we now understand where you guys are coming from"were the words of one senior negotiator to his counterpart recently.

It would be good to see more adoption of mediation clauses in standard professional appointments and building contracts, using the SBCC form for example. This may help to encourage greater awareness and use.

Mediation is not a utopian ideal but, for sophisticated  developers, contractors and construction professionals, for whom negotiation is the preferred choice when difficulties arise, it makes sense. As one industry insider recently observed: "The vast majority of construction disputes are suited to early, facilitated settlement".