By Bruce Jervis
Construction projects typically involve numerous participants, each with its own role. When there is a claim or dispute, it is not necessarily limited to two of those parties. The performance of many parties may be called into question. In order to arrive at a resolution which is fair, consistent and comprehensive, it is crucial to get all parties into a single forum. This is not always easy to accomplish.
Different contract documents contain different dispute resolution procedures. The struggle to get all involved parties together under the same roof can produce some strange results. The Adviser reported recently on two subcontractors that were compelled to submit their dispute to arbitration even though there was no contract – and no arbitration agreement – between the two. Now there is another strange case, this one involving internal inconsistencies in a subcontract.
The prime contractor on a federal project awarded a subcontract which called for the prime to sponsor subcontractor claims against the government, limiting the sub’s recovery to funds recovered from the government. The subcontractor could not recover any other money for claims or changes from the contractor. But the subcontract also called for binding arbitration of disputes between the contractor and subcontractor in accordance with the rules of the American Arbitration Association. Obviously, binding arbitration is inconsistent with the prosecution of a claim against the federal government in accordance with the Contract Disputes Act. Yet the prime contractor was compelled to submit to arbitration with the subcontractor.
Do you encounter inconsistent dispute procedures which hinder the fair, expeditious resolution of claims? Do many in the industry even give any thought to this matter when selecting and utilizing various “standard” contract forms? I welcome your comments.