Mandatory Use of ADR in Construction—A Fundamental Change from Voluntary Participation

Resolving disputes is undoubtedly part of the daily activities of construction professionals. Construction disputes typically have both technical and legal dimensions. For this reason, courts may not be the most appropriate forum for settling construction disputes. Alternative dispute resolution techniques is a generic description used to identify a wide range of resolution processes that aim to resolve disputes speedily and cost efficiently. In fact the acronym ADR can also stand for amicable dispute resolution to reflect these desired outcomes.

The ADR movement in construction has gathered momentum since the 1980s and is now widely practiced in the construction industries of many countries. Notwithstanding this wide adoption, the geographical differences attributed to cultural factors, maturity of the industry, and prevalent legal systems in force are influencing the use of ADR practices. Furthermore, participation in ADR techniques remains largely voluntary, and the legal ramifications arising from them remain uncharted. The associate editor of the Legal Affairs Section, the editor of JPI, and ASCE are to be commended for their vision in promoting this special issue on Legal Aspects in Alternative Dispute Resolution.

From its very inception, ADR has been a form of assisted negotiation, in which settlement of a dispute is facilitated by a neutral third party. A notable example is mediation, whereby the mediator assists the disputants in coming to an agreement through shuttle diplomacy. Nevertheless, other ADR forms that are more adjudicatory have emerged and even acquired statutory mandates in recent years.

This special issue includes six papers. In a forum paper, Jones provides a timely summary of the forms of dispute resolution available for use in construction. The dispute resolution processes are categorized in three groups: administrative issue resolution, nonbinding nature dispute resolution, and binding nature dispute resolution. Notably, there is no hard and fast rule on choice; nonetheless, Jones points out that ADR can be an effective and efficient method of resolving disputes if used in the correct way and in the correct situations. More specifically, the nature of the dispute is the decisive factor in choice.

The summary of Jones on the forms of dispute resolution suggests a trend of imposing statutory adjudication in several jurisdictions. The United Kingdom is a notable example because of the enactment of the Housing Grants Construction and Regeneration Act in 1996. Among other measures used in addressing typical problems in construction contract practices, parties to a construction contract, under the act, have the right to refer disputes to adjudication. Kennedy, through his Adjudication Reporting Center, collected valuable data on the use of adjudication in the U.K. construction industry since 1996. A decline in the number of mediation cases was noted, as well as an increase in the use of adjudication, especially for more-complex disputes. The high percentage of adjudication proceedings commenced after practical completion remains a real concern, since the underlying intent of statutory adjudication is to encourage dispute adjudication at any time during the project.

Although change in judicial attitude toward statutory adjudication has been expounded by Kennedy, the other provisions regulating payments of the U.K. Housing Grants Regeneration Act of 1996 are also of long-term significance. A similar act, the 2004 Singapore Building and Construction Industry Security of Payment act, was enacted in Singapore. Chan gives a detailed account of the provisions for payments. The main objective is to ensure cash flow by way of payment for works properly done. The use of legislation, which may conceivably violate the conventional wisdom of freedom of contract, is nonetheless a blunt but practical and equitable instruction for ensuring healthy cash flow, as suggested by Chan.

Donohoe highlights the latest developments in judicial attitudes toward ADR in English courts, where ADR cannot be imposed on unwilling parties. Moreover, as illustrated by two recent construction cases, draconian costs may be sanctioned against those who unreasonably reject ADR before proceeding to trial. The guidelines used by the Court of Appeal in considering whether a rejection to ADR is reasonable include the nature of the dispute, the merits of the case, the extent to which other methods of settlement have been attempted, whether any delay would be prejudicial, whether the costs of mediation would be disproportionately high, and whether the mediation has a reasonable prospect of success.

Dispute resolution can be a costly exercise. Gebken and Giben empirically demonstrate the disproportionate resources, in terms of transactional cost, associated with construction dispute resolution in the United States. They also suggest the use of a dispute management system to resolve conflict at the lowest levels possible. The suggested system is akin to the traditional risk management system and thus has three components: dispute identification, dispute assessment, and dispute control.

Through the use of a case study, Vallero and Vesilind illustrate how disputes can be avoided if sufficient consideration can be directed toward those affected. Empathy is the term used. In the context of dispute resolution, the writers argue that to be an effective and good engineer, one should be able to put oneself in the place of those who have given their trust. If this attitude is maintained, suggestions and decisions can often be more equitable and therefore less prone to dispute.

The papers for this special issue are a valuable collection, since they provide a timely update on the development of ADR, in particular for the change in judicial attitude. This is complemented by an empirical analysis of the exorbitant resources of litigation. As such, dispute avoidance should top the agenda. Empathy and orientation of the disputing parties to each other may be one of the keys for success in ADR.