Stage 3: Standing Neutral

1. Stage 3: Standing Neutral

2. Definitions • WHAT • Neutral Third Party Providing Objective Feedback • WHO • Neutral Advisors, Owner/Agency Review Boards, Dispute Resolution Boards, On-Call Contractor • WHY • Failure of A/E to Provide Unbiased Feedback • HOW • Understand Participants’ Relationships and Objectives • Resolve Dispute in a Timely Manner with Control Over the Outcome • Assess the Different Available Options

3. Case Study • $187 million State-of-the-art Land Level Transfer Facility in the Northeastern United States • Design-build Contract but Defaulting Contractor • Lump Sum Agreement with a New Design-build Contractor • Representation of Site Conditions not Spelled Out in the Contract • Clause for an Adjustment in Price and/or Performance Period if Differing Site Conditions • Claims of New Contractor for Substantial Damages (Exceeding $50 million) Due to Inaccurate Representation of Marine Subsurface Conditions in the Preliminary Design Performed by the Defaulting Contractor • Third Party Neutral Retained by the Insurance Carrier’s Counsel

4. Case Study: Important Issues • What Services Might the Neutral Third Party Provide? • What Are the Reasons for the Insurance Company’s Selection of an Independent Report? • Is This Type of Analysis a Reality Check for Both Parties? • Although the Recommendations Are Not Binding Among the Parties, What Effect Might They Have if the Conflict Escalates?

5. Outline • Neutral Advisor • Owner-Agency Review Boards • Dispute Review Board • On-call Contractor

6. Neutral Advisor • Mediator Jointly Pre-Selected as a Dispute Resolver Throughout the Construction Process • Great Familiarity with Project Documents • Assistance of Stakeholders in Reaching a Win-win Solution • Intervention Even Before the Occurrence of Disputes for Consultancy Services

7. Neutral Architect • Mediator in Post-construction Disputes in Merchant Housing Projects • Jointly Selected by Developer and Home Owners Associations (HOA) • The Ideal of Impartiality and Fair Dealing

8. Disadvantages and Risks • Non Binding Advisor’s Decisions and Repercussion of Continuing Disputes on Job Performance • A Neutral “Too” Familiar with the Job and Parties • Uneducated or Inexperienced Neutral Advisor • Neutral Advisor Becoming Partially Biased Over Time

9. Outline • Neutral Advisor • Owner-Agency Review Boards • Dispute Review Board • On-call Contractor

10. Owner/Agency Review Boards • In-house Review Boards for Public Owners, Composed of Senior Officials of the Public Agency • City Dispute Review Board in New York City Functioning as a Permanent Arbitration Panel with Binding Authority • Major Advantage • Second Opportunity to Review with the Owner Unfavorable Decisions Made by the On-site Representative • Major Disadvantage • Board Biased toward the Owner

11. Outline • Neutral Advisor • Owner-Agency Review Boards • Dispute Review Board • On-call Contractor

12. Dispute Review Board • Panel of Construction Professionals with Technical Background • Intervention for Dispute Prevention and Resolution • Alternative of the A/E and Arbitration Panel in Conflict Resolution • Selection at the Beginning of the Project by Joint Agreement Between Owner and Contractor • Real Time Knowledge of Project’s Progress • High Cost of Implementation: 0.5-1% of Construction Cost

13. CDAB (Canada) • Contract Dispute Advisory Board , a DRB with Non-binding Authority • CDAB Formed for a Specific Dispute • Concept Inception by the Ministry of Public Works and Government Services of Canada in 1987 • Three Members: Neutral Chairman, Representative of the Ministry, Representative of the Contractor/Consultant • Two Combined Techniques: DRB and Executive Minitrial

14. CDAB DART Procedure Contractor/Consultant requests to the Minister the constitution of a CDAB to review and settle a pending claim Minister Reviews the request and determines whether it is necessary to form the CDAB Minister can negotiate a settlement with the contractor/consultant The contractor gets eight weeks to prepare and submit in writing to the Ministry copies of all documents supporting the claim The Ministry gets four weeks to review the documents and prepare its case Both parties make their respective presentations to the Board The Board reviews the information gathered at the presentations and sends a recommendation to the Minister, who them advises the contractor on his/her decision The contractor can accept the proposal by the Minister, or proceed to submit its claim to arbitration or litigation

15. Outline • Neutral Advisor • Owner-Agency Review Boards • Dispute Review Board • On-call Contractor

16. On-call Contractor • Contractor Hired by the Owner to Perform Last Minute Additional Work Orders • Need for a Separate Schedule to Control New Contractor’s Activities • Importance of Minimizing the Interference Between the Two Contractors • Advantages • Smooth Completion and Job Closeout Process • Prevention of Last-Minute Disagreements Between Owner and Main Contractor

17. Outline • Neutral Advisor • Owner-Agency Review Boards • Dispute Review Board • On-call Contractor

18. Case Study • Services Provided by the Third Party Neutral • Review and Analysis of Geotechnical Information in Design Drawings and Commissioned Reports • Comparison between Geotechnical Information Available to Bidders and Conditions Reported by Contractor • Analysis of Entitlement to Additional Compensation • Verification of Compensable Costs • Analysis of Progress Schedule • Output : Expert Report for the Findings • Results • Rejection of Contractor’s Claims • Dispute Settlement in Subsequent Negotiations

19. Summary • Common Denominators of Techniques Used in the Standing Neutral Stage • Third Party Involvement • Unbiased Decisions • Knowledgeable Expert • Cost,Time and Resources Savings • Variations • Number of Agents Involved • Relationship of the Agents with the Project • Stage of Involvement

20. Different SNT Standing Neutral Technique Neutral Advisor Owner Review Board Dispute Review Board On-Call Contractor Number of Agents 1 Multiple Multiple 1 company Relationship of the agent with the project External Internal External External Stage in which the agents become involved From the beginning of the project When conflicts arise From the beginning of the project Towards the end of the project. Before conflicts arise

21. References • [ASCE, 1997]: Technical Committee on Contracting Practices of the Underground Technology Research Council. Avoiding and Resolving Diputes During Construction: Successful Practices and Guidelines. ASCE. 1997. • [Bristow, 1998]: Bristow, David. The New CCDC2: Facilitating Dispute Resolution of Construction Projects. A paper delivered to the Canadian Bar Association – Ontario. December, 1998. • [Croain-Harris, 1994]: Construction industry ADR / Catherine Cronin-Harris. -- New York, NY : CPR Institute for Dispute Resolution, c1994. • [ENR, 8/26/1991]: McManamy, Rob. Quiet Revolution Brews for Settling Disputes. Engineering News Record. McGraw-Hill, New York. pp. 21-23 August 26, 1991. • [Kane, 1992]: Kane, Christopher. Mitigation Construction Contract Disputes. Public Utilities Fortnightly. Vol. 130 (1). pp. 11-12. July 1992. • [Kemp, 1998]: Kemp, Jack, (1998). Dispute Resolution Using a Neutral Architect. Punch List Vol. 20 (4) Winter • [Peña-Mora et al, 2002] : Peña-Mora, F., Sosa, C., and McCone, S. Introduction to Construction Dispute Resolution. Prentice Hall, New Jersey, 2002 • [Treacy, 1995]: Treacy, Thomas B., (1995). Use of ADR in the Construction Industry. Journal of Management in Engineering Vol. 11 (1) pp. 58-63. January/February, 1995. • [Zack a, 1997]: Zack, James G., (1997). Claims Prevention: Offense Versus Defense. AACE. Vol. 39 (7) pp. 23-28. July • [Zack b, 1997]: Zack, James G., (1997). Resolution of Disputes: The Next Generation. AACE Transactions. pp. 50-54.