5 Advantages of Arbitration for Construction Disputes

A construction project without dispute is almost inconceivable.

In fact, a full 98% of construction projects generate a cost overrun or delays, according to McKinsey. Likewise, the design, engineering and management consultant Arcadis found it 70% of construction projects end complaints

In the post-pandemic world, construction projects are ending up in litigation more often than ever, and with higher dollar values. In fact, the the construction industry had the third highest count and cost of legal filings among all US business sectors, according to a recent report by business credit rating agency Creditsafe.

All litigation is costly and time-consuming. But construction cases tend to take longer and are more expensive to litigate than other commercial cases because of the sensitive nature of the building and the sheer volume of documents involved.

As an alternative, Arbitration offers both time and cost savings. Benefits include:

time: Construction arbitration is much easier to schedule than litigation, which depends on the court’s docket, the availability of judges (and sometimes juries), and requires many months of discovery to reach a trial. On the other hand, the parties to the arbitration have the flexibility to schedule the hearing as they wish and, in fact, may also select an arbitrator who is available sooner.

Arbitration agreements also often require certain milestones in the dispute process within certain time frames, which litigation does not. They generally require a written decision within a certain period of time after the hearing, so they provide a quick result. Just try to bring this concept to court.

The truncated arbitration schedule can also allow a project to continue while pending, which reduces project delays.

expense: Most arbitrations involve limited discovery, such as sharing key documents and negotiating whether further exchanges of documents are necessary. On the other hand, litigation requires extensive discovery. In particular, the complex nature of the construction process leads to time-consuming and expensive exchanges of documents, depositions, and prior motions. Discovery also delays the resolution of a dispute.

Because time is money, achieving a quick resolution results in cost savings while keeping construction on track and saving on litigation costs.

Purpose: Arbitration awards are generally final (absent arbitrator error or misconduct) and enforceable in courts of all 50 states and the District of Columbia. Generally, a reviewing court will uphold the award as long as the arbitrator acted within his authority. Thus, in general, the parties to the arbitration can be confident that the process will result in a resolution and conclusion of the dispute.

confidentiality: Arbitration is a private process and, unlike litigation, parties can prevent the proverbial airing of their dirty laundry in public. The project’s private and sensitive information is preserved. Finally, the confidential nature of the procedures avoids reputational damage, thus preserving relationships between project participants that may be affected by a public conflict.

Flexibility: Because arbitration is a contract-based procedure, the parties are free to adapt anything and everything about it. From location to rules, selection of arbitrators, procedures and deadlines, parties can choose how they want to work together toward a resolution. In fact, the process can even be modified to suit the complexity of the dispute, leading to greater efficiency and satisfaction with the results.

Know the drawbacks

Of course, arbitration is not a panacea, and there may be good reasons to choose the litigation route. For example, some of the advantages of arbitration could be considered disadvantages, such as the limited ability to appeal a decision to a court and the more restricted discovery process, which means less information to help resolve the dispute. dispute