STANDING NEUTRAL: AN ALTERNATIVE ADR

Standing Neutral is a simple, cost efficient and, most importantly, time saving method of resolving disputes arising from construction projects. A STANDING NEUTRAL is simply an individual, selected by the parties prior to groundbreaking, to serve as the sole mediator/arbitrator for all disputes arising from the project. This process, when used well, can significantly reduce the cost of the project for all parties by keeping lawyers out of the process and eliminating those exorbitant arbitration fees collected by the big agencies. But the best benefit is the savings in time as the worst thing that can happen to any construction project is delay.

Delays can occur from a variety of sources and usually result in a claim by the owner for liquidated damages or by the contractor for extended general conditions (direct job site), extended home office overhead (Eichleay formula), loss of bonding capacity and lost profits on projects the contractor believes they could have gotten but didn't because of the delay. While litigating these claims is expensive and time consuming, the worst problem is the actual time the project completion may be delayed while the parties haggle.

Common sense and experience tells us that people are more agreeable at the beginning of a relationship than at the end. The time to put in place an effective dispute resolution procedure is up front in the contract documents. By pre-selecting the single mediator/arbitrator, no time is wasted with selection at the very time the parties are least likely to reach an agreement. The agreement to appoint the STANDING NEUTRAL is signed by the owner, architect and the contractor and becomes part of the contract documents which are incorporated by reference in all the subcontracts, bonds, and sub-consultant contracts so that every party involved in the project is bound by the same dispute resolution procedure. The cost of the STANDING NEUTRAL can be a line item on the contractor’s application for payment and financed as a cost of construction to avoid the dilemma of being paid by and therefore owing allegiance to anyone in particular. Neutrality is the key to success.

The STANDING NEUTRAL is on call to resolve disputes within minutes or hours, rather than months or years, utilizing his working knowledge of the project gathered through his involvement from day one. The STANDING NEUTRAL would initially attempt to facilitate a compromise, failing which he would be empowered by the parties to render a final and binding decision. No need for lawyers or expensive proceedings. For better or worse, a final decision is made and the project moves forward without delay.